Remember when 3% mortgage rates seemed low? Last week, Freddie Mac reported a new record low average for the 30-year fixed rate mortgage: 2.88%. United Wholesale Mortgage now wants to take rates even lower—nearly a full percentage point below Freddie Mac’s all-time low. UWM is touting a loan program that allows borrowers to lock in rates as low as 1.99% for both home purchases and refinances.
The rate is available only through independent mortgage brokers, the company said in its announcement this week. Other lenders may be tempted to follow suit to compete.
“I never thought I would see a rate starting with a ‘1,’ but I also never thought I would see a worldwide pandemic—and that’s what it took,” says Matt Rasetta, owner of Superior Rate Mortgage of New England. “It means mortgage brokers like me are going to make a lot of money because so many people will refinance, but it’s the silver lining of a not-too-great situation for the rest of the world.”
So, how feasible is it to get a mortgage rate under 2%? UWM has released limited details so far on qualifications to snag that 1.99% interest rate. UWM is also offering 15-year fixed-rate mortgages as low as 1.875%, for which the company is requiring a FICO score of at least 640 to qualify. The low rates are only for owner-occupied properties.
The Motley Fool reports that borrowers likely will have to pay more up front in closing costs and points on their mortgage to get rates below 2%. Mortgage points are where you essentially pay a fee to a lender at closing to snag a lower rate. So, borrowers will want to check how much they will be required to pay up front in points to know whether a 1.99% rate is truly the best deal for them. Usually, financial experts say you’ll need to factor how long you plan to stay in the property to determine if it’s worth paying for those points.
Source: “UWM Announces 1.99% Rate for 30-Year Fixed Mortgage,” HousingWire (Aug. 11, 2020) and “This Lender Just Launched a 1.99% Mortgage,” The Ascent/Motley Fool (Aug. 12, 2020)
