Why The Best Refinance Rates Houston Are Higher Than Purchase Loan Rates?

By okbridalshop08 on Aug 23, 2021

You may have noticed that refinance rates are higher than purchase loan rates if you’ve been comparing mortgage rates recently to save money on your house loan. Over the summer, mortgage interest rates fell substantially, to the point where house loans have never been cheaper in most of our adult lives. You may have contemplated taking advantage of historically low rates by acquiring a new house or refinancing your current mortgage.

Depending on how the best refinance rates Houston and new purchase house loan rates are established, there are numerous explanations for this rate discrepancy. In addition to the rate differential, mortgage refinancing is much more difficult to qualify for given the present economy. Before you hurry to refinance your house, be sure you have all of the facts you need to make the best financial option for you.

How Refinance Loans Are Determined?

Although some lenders may not make it apparent that their refinance rates are high, others make it clear that their refinance rates are higher. There are several reasons why major banks may demand higher refinancing rates, including:

Lenders Are Putting A Cap on The Number of New Applications

Mortgage refinancing has become so popular that some lenders are unable to meet all of the demands. Many lenders are simply restricting the number of refinancing applications they accept or adding extra restrictions that limit the number of loans that may qualify, rather than hiring more workers to deal with a surge that won’t persist forever.

Because new home purchasers have deadlines to meet, some lenders are favoring new purchase loans above mortgage refinancing applications. Various big banks and lenders are simply unable to keep up with the rising housing market in many regions of the country.

Fees For Refinancing Have Been Increased

Fannie Mae and Freddie Mac announced in August 2020 that from September 1, they will charge a.5% fee on refinancing mortgages. This cost will be applied to both cash-out and no-cash-out refinances. Lenders can reduce the quantity of refinance loans they have to execute by increasing the cost of refinancing, allowing them more time to focus on purchase loans and other businesses

Rate Locks Are Not Cheap

In general, locking a rate on a refinancing loan costs more than locking a rate on a purchase loan. Lenders are becoming less interested in dedicating resources to the recent rise in mortgage refinancing applications as a result of this.

This is particularly true since many refinancers may lock in a rate with one lender, then transfer lenders and lock in another rate if interest rates fall. After all, lenders want to earn a profit, so it’s only natural that they’d focus their efforts on the most profitable loans.

Refinancing your current mortgage can save you money on interest, but don’t count out the possibility of buying a new house instead. Buying a new house might help you save money on interest while also providing you with the size and features you desire. Remember that whether you refinance or buy a new home, there are actions you can do to make yourself a more eligible borrower.

You may not be able to influence the economy or the Federal Reserve, but you can influence your own finances. Improving your credit score as soon as possible and paying off debt to reduce your debt-to-income ratio are two good places to start. If you intend to purchase a new house, set aside a sizable down payment. Whether you decide to relocate or stay in your current home, these procedures will help you receive the best prices and terms possible.