Tag Archive for: conventional loans

Conventional vs DSCR Interest Rates

Categories: , ,

When it comes to real estate investing, understanding interest rates can make or break your deals. Whether you’re financing a rental property or a fix-and-flip, it’s essential to know the difference between conventional vs DSCR (Debt Service Coverage Ratio) interest rates. Let’s break it all down so you can stay ahead of the game.

What Impacts Interest Rates?

You may have noticed that even when the Federal Reserve cuts rates, mortgage rates don’t always follow. Why? It all comes down to supply and demand in the market.

  • DSCR Rates: These track closely with the 5-year treasury note.
  • Conventional Rates: These are tied to the 10-year treasury note.

Both types of loans adjust based on market conditions, not directly on Fed decisions.

How to Track DSCR and Conventional Rates

Knowing where rates are headed is key to timing your deals. Here’s how you can stay informed:

DSCR Rates

DSCR loans rely on the 5-year treasury rate, with an added margin. For example, if the 5-year treasury rate is 4.2%, and lenders add 2.75%, your DSCR rate would be around 7%.

  • Example: The 5-year treasury peaked at 4.64% recently but is now in the 4.2–4.3% range. If you’re ready to lock in, this can make a big difference in your payment.

Conventional Rates

Conventional loans follow the 10-year treasury rate, with margins that vary. Typically, lenders add about 2–2.5 points, though it can go higher.

  • Example: If the 10-year treasury rate is 4.41%, conventional rates might range from 6.5% to 7% depending on market conditions and lender fees.

Why Timing Matters

Rates don’t stay still—they move up and down daily, sometimes by 10 to 20 basis points. This is why being ready to lock in during a micro dip can save you thousands.

Micro Dips in Action

When the 5-year treasury dips, DSCR rates follow. For instance:

  • September Example: After rates hit a high, a brief drop occurred as the market believed inflation was under control. But when traders realized inflation wasn’t tamed, rates bounced back up.

The same goes for conventional loans, where dips depend on shifts in the 10-year treasury.

Tools to Stay Informed

You don’t need to monitor rates all day. Here’s how to stay in the loop:

  1. Check Online: Search “Today’s 5-year treasury rate” or “Today’s 10-year treasury rate” on MarketWatch or similar sites.
  2. Subscribe to Reports: The Cash Flow Company’s weekly Mortgage Report keeps you updated on DSCR and conventional rates.
  3. Use Alerts: Sign up for tools like our A-List, where you’ll get notified when rates hit your target.

What’s Ahead for Rates?

In the next year, expect fluctuations:

  • DSCR Rates: Likely to hover between the mid-6% to low-7% range.
  • Conventional Rates: May stay between high-5% to low-7%, depending on inflation and the economy.

This means staying proactive and informed is crucial for locking in the best deals.

Final Thoughts

Interest rates are more than just numbers—they’re the key to cash flow, affordability, and the success of your investments. By tracking treasury rates and timing your loans during dips, you can optimize your deals and maximize your returns.

If you’re unsure where to start, tools like our Mortgage Report and A-List we are here to help.

Ready to learn more? Check out our Investor Mortgage Report for the latest investor forecast for 2024.

Watch our most recent video to find out more about: Conventional vs DSCR Interest Rates

by

How to Get Ready for Rate Drops

Categories: , , ,

Today we will be discussing how to get ready for rate drops., and why staying ahead of rate changes is crucial for real estate investors. Whether you’re focused on DSCR loans or conventional loans, being prepared for even small dips in interest rates can save you thousands. Here’s how to stay ready and informed, so you can lock in the best rates at the right time.

Understand What Drives Interest Rates

It’s a common misconception that the Fed Funds Rate directly affects mortgage rates. While it plays a role, investor loans, including DSCR and conventional loans, follow different patterns:

  • DSCR Loans: These are closely tied to the 5-year Treasury rate.
  • Conventional Loans: These track the 10-year Treasury rate.

For example, if the 5-year Treasury rate is at 4.3%, a competitive DSCR loan rate might add about 2.75%, making it just over 7%. Similarly, a 10-year Treasury rate of 4.4% could translate to a conventional loan rate around 6.5% to 7%, depending on lender margins.

Why Rates Fluctuate

Rates are driven by supply and demand in the bond market. When the government issues more treasuries, buyers often demand higher returns, which raises rates. Inflation also plays a big role. If inflation feels out of control, the market adjusts, pushing rates higher.

For instance:

  • In late 2023, inflation concerns caused a jump in 5-year and 10-year Treasury rates, which directly impacted DSCR and conventional mortgage rates.

Monitor Treasury Rates Regularly

To predict mortgage rate trends, keep an eye on Treasury rates. Here’s how:

  1. Search Online: Type “today’s 5-year Treasury rate” or “today’s 10-year Treasury rate” into Google. Look for up-to-date information from sites like MarketWatch.
  2. Review Trends: Check the charts to see recent movements. For example, a drop from 4.6% to 4.3% in the 5-year Treasury could signal a favorable moment to lock in a DSCR loan.
  3. Add the Spread: Use simple math to estimate loan rates by adding the standard spread:
    • DSCR Loan: Add 2.75% to the 5-year Treasury rate.
    • Conventional Loan: Add about 2–3 points to the 10-year Treasury rate.

Be Ready to Act During Micro Dips

Interest rates for DSCR loans often experience brief drops, or “micro dips.” These dips may last only a few days or weeks, so preparation is key.

For example:

  • If DSCR rates dip to 6.5% from 7%, you’ll want to lock in immediately. Waiting could mean missing out on significant savings.

Tools to Stay Prepared

Here are a few strategies and resources to help you stay ahead:

  1. Sign Up for Alerts: Services like The Cash Flow Company’s A-List notify you when rates hit your target. For example, if you’re waiting for a 6.2% DSCR rate, you’ll get an alert when it’s available.
  2. Weekly Mortgage Reports: Subscribe to a weekly update that tracks rate trends for DSCR and conventional loans. This keeps you informed without having to check daily.
  3. Monitor Markets: Use tools like Google and MarketWatch to track 5-year and 10-year Treasury rates. Even small daily changes can make a difference.

What to Expect in 2024

Experts predict rates will remain in a narrow range over the next year:

  • DSCR Rates: Likely between 6%–7.5%.
  • Conventional Rates: Expected to stay between 5.5%–7.5%.

While rates will fluctuate, being prepared to act during a dip will give you the edge.

Ready to Lock in Your Rate?

Taking the time to monitor rates and understand their trends will help you maximize your cash flow. Whether you use tools like our A-List or track Treasury rates yourself, preparation is everything. Remember, even a small dip can make a big impact on your bottom line. Stay informed, act quickly, and get ready for the opportunities ahead.

By staying proactive and monitoring the market, you can ensure you’re always one step ahead. Ready to learn more? Sign up for our weekly mortgage report or join the A-List today!

Watch our most recent video to learn more about: How to get ready for rate drops.

by

Real Estate Market: What’s Happening with Interest Rates?

Categories: , ,

Today we are going to discuss what’s happening with interest rates. Interest rates are the heartbeat of the real estate market, and they’ve been anything but predictable lately. Whether you’re an investor eyeing DSCR loans or tackling fix-and-flip projects, understanding rate trends is key to making smart moves. Let’s dive into what’s driving these shifts, how to keep track, and what it all means for your next investment.

Why Are Rates So Unpredictable?

You may have heard about the Federal Reserve cutting interest rates. However, those cuts don’t directly lower real estate loan rates. Instead, the real estate market relies heavily on treasury yields.

  • DSCR loans align with the 5-year Treasury note.
  • Conventional loans follow the 10-year Treasury note.

This means your rates depend on how these treasuries perform, not just on what the Fed decides.

What’s Happening Right Now?

DSCR Loans: Small Dips, Then Jumps

DSCR loan rates have seen slight drops, or “micro dips”, lasting a week or two before climbing again. These rates typically start with the 5-year Treasury yield and add about 2.75%.

For example:

  • If the 5-year Treasury is 4.3%, DSCR loan rates may land around 7% for 75-80% loan-to-value (LTV) loans.

Conventional Loans: Higher Add-Ons

Conventional loans, commonly used for fix-and-flip projects, work similarly. Add about 2-3 points to the 10-year Treasury rate to estimate rates.

For example:

  • A 10-year Treasury yield of 4.41% could result in rates around 6.5% to 7.5% for borrowers.

Why Are Rates Moving This Way?

Two key factors drive rate changes:

  1. Inflation Worries
    Investors in treasuries expect higher yields when inflation feels uncertain. This increases borrowing costs for everyone.
  2. US Treasury Supply
    As the government issues more treasury bonds, buyers demand higher interest rates. The market adjusts to balance supply and demand.

What’s Next for 2024?

Experts expect rates to bounce within a predictable range:

  • DSCR Loans: Mid-6% to low-7%.
  • Conventional Loans: High-5% to mid-7%.

If you’re investing, watch for those micro dips. When they happen, it’s time to lock in a rate quickly.

How to Monitor Rates

Want to track interest rates like a pro? Here are two simple ways:

  1. Check Treasury Yields
    Search for “today’s 5-year Treasury rate” or “10-year Treasury rate” on Google. Websites like MarketWatch show up-to-date rates and trends.
  2. Sign Up for Weekly Updates
    The Cash Flow Company offers a free Mortgage Report to help investors track changes. We even notify you when rates hit your target.

Be Prepared for Rate Fluctuations

Interest rates are unpredictable, but that doesn’t mean you have to be caught off guard. By tracking trends and understanding the factors, you can make smarter decisions for your real estate investments.

Want to know when rates hit your sweet spot? Join our A-List, and we’ll notify you when they do. Sign up below to stay in the know!

Take Control of Your Investments Today.

Stay informed, act quickly, and secure the best rates for your deals. Let’s make 2024 a successful year together!

Watch our most recent video to find out more about: Real Estate Market: What’s Happening with Interest Rates?

by

Why Investors Should Know About Conventional Rates

Categories:

Why Investors Should Know About Conventional Rates

Welcome to Your September 2024 Market Update

Today we are going to discuss why investors should know about conventional rates in this real estate market. Here at The Cash Flow Company we want to keep you as up to date as possible on these changes so that you can make the most of it! Let’s take a closer look.

Conventional Rates: A Better Time for Buyers

Why should you care about conventional rates? Well, they’re crucial because they determine what your end buyers can afford. Right now, we’re seeing rates in the high fives and are around 5.625% to 5.75% for those with excellent credit and strong LTVs on owner-occupied properties.

Looking Forward

If the Fed continues to drop rates, we could see conventional rates fall into the low fives by the end of the year or early next year. While I don’t expect rates to drop more than a point or point and a half in the next 12 months, even these modest decreases will make a big difference. More buyers in the market mean more opportunities to sell your properties and move on to the next deal.

Now is the time for change!

So, what’s the takeaway? Rates are trending down across the board for DSCR loans, fix and flip projects, and even conventional loans. That’s great news for not only cash flow and affordability, but for getting your properties sold as well. The past year has been tough with high rates, but the tide is turning. More buyers are entering the market, properties are starting to cash flow again, and there’s a lot more activity overall.

Stay Updated with Our Mortgage Report

Want to keep up with where rates are headed? We’ve got a mortgage report that tracks the trends and tells you who’s offering the best rates for fix-and-flip, DSCR, and other loan products. Watch our most recent video to find out more about Why Investors Should Know About Conventional Rates.

by

Real Estate Market Update for Investors – September 2024

Categories:

Real Estate Market Update for Investors – September 2024

Welcome to Your September 2024 Market Update

Hey there, it’s Mike with The Cash Flow Company! I’m here to give you a quick rundown of where the real estate market is headed and what it means for you as an investor. Whether you’re looking at DSCR loans, fix-and-flip projects, or even conventional rates, I’ve got you covered. Let’s take a closer look at the real estate market update for investors.

DSCR Loans: Rates are Dropping

If you’ve been eyeing DSCR loans, there’s some good news. We’ve seen rates drop by about 30 basis points this month alone. For well-qualified clients with strong properties, rates are now in the high sixes for 75% to 80% loan-to-value (LTV) ratios. That’s a significant decrease and nearly half a point lower than just a few months ago.

What’s Next?

Looking ahead, it’s a bit uncertain. The Federal Reserve is likely to increase rates by a quarter-point in September, and they’re talking about a few more hikes before the year ends. However, DSCR rates are based on a 5-year term rather than a 10-year, so they may fluctuate differently. However, by the end of the year, we could see these rates dip into the low sixes and possibly even the high fives early next year.

Conventional Rates: A Better Time for Buyers

Why should you care about conventional rates? Well, they’re crucial because they determine what your end buyers can afford. Right now, we’re seeing rates in the high fives and are around 5.625% to 5.75% for those with excellent credit and strong LTVs on owner-occupied properties.

Looking Forward

If the Fed continues to drop rates, we could see conventional rates fall into the low fives by the end of the year or early next year. While I don’t expect rates to drop more than a point or point and a half in the next 12 months, even these modest decreases will make a big difference. More buyers in the market mean more opportunities to sell your properties and move on to the next deal.

Fix-and-Flip Loans: Trending Downward

Now, let’s talk fix-and-flip loans. If you’ve got experience, which is 10 or more projects under your belt in the last two to three years, then you’re in luck. Rates for seasoned investors are now dipping back into the 8% range. Even better, we’re seeing lenders offer 10% down and 100% financing options, depending on your credit score.

What to Expect

This trend of decreasing rates is likely to continue, with some lenders already offering rates below 10% and even into the 8% range for well-qualified investors. Don’t expect huge changes by the end of the year, though. We might see another quarter or half-point drop, but this new reality of lower rates is here to stay, at least for the next 6 to 9 months.

The Bottom Line

So, what’s the takeaway? Rates are trending down across the board. That’s great news for cash flow, affordability, and getting your properties sold. The past year has been tough with high rates, but the tide is turning. More buyers are entering the market, properties are starting to cash flow again, and there’s a lot more activity overall.

Stay Updated with Our Mortgage Report

Want to keep up with where rates are headed? We’ve got a mortgage report that tracks the trends and tells you who’s offering the best rates for fix-and-flip, DSCR, and other loan products. Watch our most recent video to find out more about Real Estate Market Update for Investors – September 2024

by