Ask Bankrate: Questions about mortgage rates, forbearance relief, real estate and more

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Ask Bankrate is a recurring feature where Bankrate’s experts answer your financial questions. Visit this page for more information on how to submit your question. Click on a question here to jump straight to it.

Questions:

Q1: How low can mortgage rates go?

How low do you think mortgage rates could reasonably go?

— Brian V., Vanessa F. and Khan

Answered by Jeff Ostrowski, senior mortgage reporter: “With mortgage rates breaking through the 3 percent barrier, everyone is wondering how low they can fall. Much depends on how convincingly the coronavirus can be contained. A safe and reliable vaccine would put the economy back on solid ground, and send mortgage rates up. Until that happens, most experts expect rates to continue to drift down.

The most dramatic projection I’ve heard comes from William Emmons, lead economist at the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis. Emmons expects the unusual divide between the 10-year Treasury and the 30-year mortgage to narrow in the coming year — and the 30-year mortgage to dip near 2 percent. However, keep in mind one side effect of plunging mortgage rates: The farther they fall, the more homeowners apply for refinancing. Already-busy lenders have been reluctant to cut rates too much.”

Q2: What are the chances that forbearance relief is extended?

What’s the possibility for the CARES Act on forbearance to extend beyond 12 months?

— Ash

Answered by Jeff Ostrowski, senior mortgage reporter: “A logical question, but it’s way too soon to handicap this one. For a frame of reference, consider that Congress was still debating the extension of emergency unemployment assistance days before that crucial program expired.

Forbearance measures for many borrowers extend to the spring of 2021, so there’s no urgency for Congress to address further mortgage relief now, especially with an election coming in November. On the bright side, forbearance seems to be working. While confusion remains about the terms of mortgage relief under the CARES Act, the housing market has experienced no wave of foreclosures. And lenders were voluntarily extending forbearance to jumbo loans and other mortgages not covered by the CARES Act.”

Q3: Do you recommend dollar-cost averaging or lump-sum investing?

Considering where markets are right now, do you recommend dollar-cost averaging or making a lump-sum investment?

— Blaine P.

Answered by James Royal, senior investing and wealth management reporter: “Dollar-cost averaging is a great approach unless you’re tremendously savvy about the markets. It reduces the risk that you buy a stock or index at the wrong time and can help increase your returns, if the market dips.

Even if you have a lump sum now, consider spreading out your purchases over time, and you can still take advantage of dollar-cost averaging. That said, the market does look pricey now, and that’s all the more reason to use this approach.”

Q4: How can you find online banks with the highest rates?

How can you determine the online bank with the highest rate of interest?

— Carah LH

Answered by Greg McBride, CFA, Bankrate chief financial analyst: “Check out the free search engines at Bankrate.com. Here is the link to the top-yielding savings accounts, and here is the link to the top-yielding certificates of deposit. You can tailor the search parameters to your needs and the page will automatically re-sort.”

Q5: What do you need to successfully apply for a credit card?

Generally, what kind of criteria are required to apply for a credit card successfully? If I don’t have installment loans in my records recently, how can I apply for a credit card successfully?

— Amy L.

Answered by Ted Rossman, credit card analyst at Bankrate: “Credit card issuers look at two main factors: your credit score and your income. It has gotten much harder to qualify for credit cards during the COVID-19 pandemic because card companies are worried about the economy and the job market. These days, you need a credit score of at least 700 to qualify for most cards, plus sufficient income. A credit score of 740+ would be even better.

If you don’t have that right now, seek to improve your credit score through other means. Secured credit cards are a good option. With these, you put down a deposit that serves as your credit line. They’re essentially no risk to the issuer, and they can help you build your credit score if you use the card responsibly for 6-12 months.

You can also piggyback off someone else’s good credit by getting on their credit card as an authorized user (such as a parent, a sibling, etc.). Make sure they — and you — keep the account in good standing.

There are also some credit cards like Petal and TomoCredit that go beyond the credit score. They practice cash flow underwriting and are well-suited for people with good financial habits who fall through the cracks of the traditional credit system. For instance, young adults and immigrants who may not have established credit, but have healthy incomes and money in the bank.

Finally, check out Experian Boost. This free opt-in program can help your credit score by acknowledging on-time cell phone and utility payments that don’t count in other credit scoring models.”

Q6: Why is the real estate market staying so high?

Why is the real estate market staying so high? Do you expect to see that continue?

— Susan W.

Answered by Greg McBride, CFA, Bankrate chief financial analyst: “The demand exceeds the supply of homes available for sale, and low mortgage rates give would-be homebuyers more buying power. Unless and until that dynamic changes (think locally), I would expect that to continue. Maybe not increase in price in perpetuity, but certainly maintain current market values.”

Q7: Will housing shift from a seller’s market to a buyer’s market?

Are we on course to see the housing market shift from a seller’s market to a buyer’s market?

— Marlon B.

Answered by Greg McBride, CFA, Bankrate chief financial analyst: “Not yet. One possible catalyst could come next year when forbearance and other payment relief options expire at a time when unemployment and underemployment remain elevated. This could put pressure on prices in certain markets if there are suddenly more homes available for sale or more distressed properties. Certain markets seeing a wave of people move from downtown locations to the suburbs will see a shift toward a buyer’s market in those downtown locations (if it hasn’t already started), but the opposite will take place in the suburbs that are seeing an influx of demand.”

Q8: What are your thoughts on robo-investing?

What do you think of robo-investing? Where do you see inflation going?

— Gail C.

Answered by James Royal, senior investing and wealth management reporter: “Robo-advisers are a great option for investors who don’t know a lot about how to invest or who don’t want to deal with the hassle of investing. They charge a relatively modest fee for their services and offer a host of benefits such as tax-loss harvesting and auto rebalancing. Plus they’ll factor in your risk tolerance to create a portfolio that meets your needs. In sum, they’re a good opportunity for those who need portfolio management.

As for inflation, the bond market is telling you not to worry. The interest rate on 30-year Treasurys is about 1.4 percent, meaning that bond investors are not expecting much inflation for some time.”