Senior Loan Officer | NMLS #174108
Branch NMLS #1815933
Posted On January 28, 2020
Tomorrow, the Federal Open Market Committee will meet for the first time in 2020, and based on the minutes from the December 2019 meeting, no interest rate movement is expected. Since the three rate cuts of 2019, mortgage rates have dropped to historically low levels, incentivizing many home buyers and homeowners looking to refinance. If the Fed stays the course and holds interest rates steady next week, it will likely continue to motivate home buyers and homeowners looking to refinance.
Here are the top four housing trends to expect in 2020:
Refinancing will continue
As of September 2019, 11.7 million homeowners could cut their mortgage rate by at least 0.75%. Even with the wave of refinance activity at the end of last year, many homeowners could still benefit from a mortgage refinance. In fact, 82% of homeowners who originated mortgage loans between six months and two years ago could qualify for a lower rate today with a refinance. This market share will only increase if the Fed cuts rates further.
Affordability will improve
As interest rates have fallen, home price appreciation has stabilized. After many years of rapid home price appreciation, many markets are starting to slow down. Lower mortgage rates plus slower home price appreciation means more affordable homes.
Non-qualified mortgages will get popular
A non-qualified (Non-QM) mortgage is a mortgage is any mortgage that does not meet the standards of the Qualified Mortgage Rule. A non-QM mortgage can include a bank statement loan for self-employed borrowers, a near-prime loan for borrowers with lower credit scores, or an offset loan like the All In One Loan – designed to apply payments to loan principal first to reduce the lifetime cost of mortgage interest. With the possibility of GSE reform in the near future, there is a renewed interest in the non-QM mortgage market.
A new market of home buyers will emerge
A 2018 Gallup study found that 36% of US workers participate in the “gig economy” and work multiple jobs. Gig workers may work full time and drive for a ride-sharing service on the side, other gig workers may work multiple freelance positions. The standard mortgage application uses W2 forms generated by the employer as proof of income. Workers who earn their money through non-traditional employment have to use bank statements to prove their source of income.
Many real estate professionals are expecting an early home buying season, especially with today’s low mortgage rates. If you’re interested in buying a home in the coming months, get preapproved for mortgage financing first. Mortgage preapproval helps you stand out from other buyers and shows the seller you’ve already started the financing process.