Before I ask my question, I'll provide the foundation for it:
- Early February we went into active house hunting mode by contacting a real estate agent and starting the pre-approval process with the mortgage broker our son works for. The broker is based in Florida and immediately started the process to be approved to write loans in Maryland. They ran our application past their in-house underwriting team and the result was we were way over-qualified to buy at the price point we're looking at, so a mortgage would be virtually guaranteed. They also told us they would to a mortgage for us at zero mark up and wouldn't run our credit until we found a place, assuming they got approved to work in Maryland.
- On Friday the 19th a condominum went on the market which mostly met our criteria, but which had a significant amount of interest from many potential buyers; our daughter lives down the hall and viewed it for us and reported dozens of interested parties, and the Zillow listing was showing lots of traffic as well. Needless to say, given the scarcity of these units, we knew there was going to be a bidding war, and given the seller's agent announced the winning bid would be announced at 7:00 in the evening of Monday the 22nd, we knew we'd need to move fast. We contacted our son and told him to pull the trigger on the pre-approval and that's when we got the bad news; Maryland had not yet approved his company for doing business in the state yet.
- On Saturday the 20th we contacted a broker our Realtor does lots of business with, filled out an application, uploaded our financials, and were given a pre-approval letter within an hour. So far so good.
- On Monday the 22nd the selling agent opened up the process for bidding; we put in a bid with automatic escalations to apoint high enough we were confident we'd win.
- Our Realtor called just before seven and told us there had been over 60 offers placed on the unit and the selling agent was pushing back the time to announce the winner two hours.
- Just before 9:00 that evening we got the bad news, we ended up second highest bid by a significant amount; another bid had automatic escalations set to a point $65,000 above our cap! We declined to increase our bid.
- While on our way to bed less than an hour later, our Realtor called us again and told us the seller liked our profile and offer better than the winning bid due to the lack of contingencies and our ability to close in less than three weeks (requested closing date is 10-May), and if we were willing to bump our offer up another $10,000, and bump our earnest money from $25,000 to $40,000, they'd sell to us. Done; we signed the contract.
- The mortgage was approved on Thursday at 7.624%, a rate a bit higher than I was expecting, even in these volitial times.
Now to my question, given our credit scores will take a hit due to both the inquiries and the new mortgage; if interest rates drop in say six months, does it make sense to refinance immediately, or to wait until the new account and inquiries age to a year (which of course might see additional interest rate changes)?
Well, you likely won't have to worry about it because it doesn't look likely that the rates will decline enough this year to warrant a refinance from 7ish %. Here's an article that goes into more detail and has a section specifically about refinancing:
https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/
https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/
Thanks folks!
The good news is I'll be comfortable from a financial perspective for the duration of the current mortgage; I can wait until the rates get down to a point where it makes sense to refinance. Regarding a 15 year mortgage simply for the sake of a lower rate; both of the mortgage brokers I've worked with recommended against that as I would be refinancing within the next few years anyway, so what's the point?
Regarding future rate drops, yeah, I agree, even if they go down this year, I doubt they'll go down enough to justify a refinance. I'm just kind of annoyed at the timing of everything; had Maryland approved the mortgage company my son works for in time, they told me they were ready to give me a mortgage at 6.75%, that would have been nice, but to get this property, I had to move fast.
@Horseshoez wrote:I'm just kind of annoyed at the timing of everything; had Maryland approved the mortgage company my son works for in time, they told me they were ready to give me a mortgage at 6.75%, that would have been nice, but to get this property, I had to move fast.
Mortgage rates have been on the rise for the last 4-5 months (and especially in the last 3 weeks). They hit a decades high in late October 2023, in the following 6 weeks they dropped by about 1.500%, stayed there for about a month, then since the beginning of February they've increased by about 1%.
