Morning! This is MF Lending - the fool-proof way to serve up mortgage and real estate market knowledge without any of the guesswork. So you’ll look like the smartest agent in the room (and you are!)

Here’s what we’ve got for you today:

1. Rate Cut Predictions Goes Viral - How Your Clients Can Capitalize Today ✂️

2. What a Difference a Month Makes 🎥

By the way, this article on Concessions, Concessions Everywhere is the most clicked link in this newsletter, you should check it out if you are interested.

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Rates Today 📉

Rate Cut Predictions Goes Viral; How Your Clients Can Capitalize Today ✂️

I have seen this Business Insider article all over Instagram - “Fed Will Cut Rates 6 Times in 2024” - an encouraging headline and post to say the least…

Here is the quick highlights of the article citing ING’s chief international economist, James Knightley:

• Predicts six interest rate cuts in 2024 - totaling 150bps in rate cuts.

• Rate cuts will start in Q2 of ‘24

• Four additional rate cuts in ‘25

• Notes that he expects to see a continually cooling job market, and deteriorating consumer spending as the two key drivers in a slowing economy

Our favorite source for Fed projections comes from CME Fed Watch Tool - let’s compare the sentiment:

• Five rate cuts expected totaling 125 bps

• Highest probability to start in May ‘24

Overall, not very far off from ING’s projections.

What would this mean for mortgage rates?

Until at least March 2024, it is a near certainty the Fed will hold rates where they are currently. This means you will see rates bounce between 6.75% - 7.5%.

Starting at the March meeting or May meeting next year, the expectation is that rates will begin to be cut.

Oftentimes, mortgage companies will attempt to get ahead of this wave and price extremely aggressively, so you may see some steep drop-offs in 30yr mortgage rates quite quickly (similar to what we have seen in the last 30 days).

If these predictions turn out to be correct, and we see a 125bp fall by this time next year, that means mortgage rates would be around 5.25% - 5.75%.

Looking out even further, if four rate cuts happen in ‘25 - mortgage rates would be between 4.25%-4.75%.

How can clients capitalize on this today?

Two key ways:

1. 2-1 Buydowns

2. Seller-paid closing costs

2-1 Buydowns

I covered this in a previous article - How to pay sub-6% until 2027 - breaking down the benefits of having discounted payments for the next three years.

This gives your clients plenty of time to see how the market shakes out and if these projections prove to be correct.

If the projections are right, clients can milk all of the benefits of the buydown and then refinance in 2025 down to 4.25% fixed.

If the projections are wrong, or if they take longer than expected, clients still have the buydown to benefit them until 2027 before their rate jumps to around 7%.

Even if the projections are correct but early, it still gives clients enough time to refinance to lower rates after the buydown period.

The 2-1 buydown (or, even better, 3-2-1 buydown) - gives clients all the flexibility in the world and should be considered in every offer you write until next year.

Seller-paid closing costs

Interest rates falling like this means one thing, refinances are coming quickly. When clients refinance, they will be required to pay closing costs, once again, on the new mortgage.

A good estimate for a loan around 500k would be 6-$7,000 in closing costs to refinance.

As an agent, if you do not think you have the leverage to ask for a 2-1 buydown, you should at least consider asking for 6-7k in seller concessions to cover the closing costs.

That way, when your client goes to refinance, they do not pay for the same fees again - they only pay it once.

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If these projections hold true, expect a very busy 2024. As rates fall, buyers will be reentering this market quickly.

I hope you stick with MF Lending for the ride 😎🪩

What a Difference a Month Makes 🎥

I posted this reel on Friday - What a Difference a Month Makes - comparing interest rates on Dec 1 to rates on Nov 1:

In just 1 month, rates have dropped more than a full 1%. The best move we have seen in recent memory.

These positive rate movements are happening while buyers continue to have leverage in the market - leaving a short window where buyers can get incredible deals (hint: this window is today).

As examples - in the last week, I have received the following deals structured by some badass referral partners 🤘🏻:

#1

- Purchase Price: $526,500
- Seller-Paid Closing Costs: $31,500 🤯

The client is using the $31,500 dollars to do a 3-2-1 buydown AND have the seller pay for discount points.

This client is getting a 6.625% rate fixed for 30 years PLUS a 3-2-1 buydown. In year 1, the client is paying a 3.625% rate.

(They also considered doing a 15-year loan instead of 30yr; that rate is 5.875%…meaning yr 1 on the 15-year loan would be 2.875%)

#2

- Purchase Price: $789,000
- Seller-Paid Closing Costs: $22,000

This client is using the seller-paid costs to do a 2-1 buydown AND pay for all of her closing costs. In year 1, the client is paying a 4.99% rate.

Mortgage applications increased every single week in November, meaning more buyers are entering the market, which will eventually swing the leverage back to the sellers. So right now is all systems go.

Enjoy the savings on your interest rates! 🪩

If you have clients who need their own scenario run…DM me on instagram (@mf.lending) and I can tell you exactly what we can get for them.

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Thanks for reading - that is all we have for today 😎

Please forward this to your friends and colleagues if you found it valuable.

— Michael F DiLucchio