VA Loans Blog

Rising Rates? Don't Worry, Be Happy

January 2nd, 2016 7:24 AM by Joan Rusco

Wow!  We just completed a historic analysis of past mortgage rates and what a surprise. As we’ve reported several times on these pages current mortgage rates are at historic lows. We don’t see that changing anytime soon. Let us give you some historic perspective we gained in our recent analysis. But first, we have a short customer story to pass on.


A client of ours at VALoansMN is searching for a house to buy. This client (who gave us permission to tell you this story) has had a  rough financial past. Due to some misfortune this client was forced into a short sale and bankruptcy a few years ago. Now our client is ready to re-enter the housing market. This is what is called the “boomerang buyer”. A buyer forced out of the housing market during the recent housing recession and now able to come back.


Our client is  not unlike hundreds of thousands of other folks who had some hard times but is now recovering and wanting to buy a home. How did  our client recover? Following our advice this client immediately opened a few  lines of credit. One was an auto loan through a local credit union. Another was a credit card available to someone with a recent bankruptcy. The credit card came with a high interest rate so she paid it off each month. Now she comes to us to pre-qualify for an FHA mortgage (yes, we have those in addition to V.A. loans). Did she get a surprise!  


Just five years after her bankruptcy and three years after the short sale of her home (she’s been a renter all this time) she and her husband easily qualified for an FHA mortgage. This couple has credit scores just under 700. They’re now searching for a house knowing we are able to secure a mortgage. They will once again be homeowners. The loan rate they can get is under four percent!  So what about future mortgage rates?  


As we reported in our last blog entry (see Feds Raise Rates-What Does It Mean? ) the FED has raised short term lending rates by a quarter point. This is the first rate increase since June, 2006. What happened to mortgage rates back in those  days of rate increases?  We were surprised to learn in our analysis, not much. From 2004 to 2006 the FED raised the short term rate (federal funds rate) by 4%. During that period as short term rate increases totaling 4% mortgage rates rose less than 1%!  Just because the FED is raising rates doesn’t mean you’ll see a corresponding increase in your mortgage rate.


A final word:  We are so grateful to you for trusting us with your home mortgage needs. We wish you and yours a very HAPPY NEW YEAR!

Posted by Joan Rusco on January 2nd, 2016 7:24 AM


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