Lower Mortgage Rates Boost Buyer Demand. Lower mortgage rates have been a boon for the housing market, as they have helped to boost buyer demand. According to a report by the National Association of Realtors, lower mortgage rates have led to an increase in home sales and a rise in home prices 1. The Mortgage Bankers Association has also reported a surge in mortgage applications, with a 9.9% increase in the first week of January 2023 alone 2. The Federal Reserve has been cutting interest rates, which has led to a decline in mortgage rates. This has made it easier for homebuyers to afford homes, which has led to an increase in demand for homes. The National Association of Realtors has reported that home sales have increased by 5.6% in the past year, while home prices have risen by 4.8% 1. The Mortgage Bankers Association has also reported that mortgage rates are expected to decline further in 2024, which could be a boost for the housing market inventory and prices 2. The National Association of Realtors has also predicted that mortgage rates will continue to decline, which could lead to a more positive outlook for the housing market 1. However, it is important to note that while lower mortgage rates have led to an increase in demand for homes, they have also led to an increase in home prices. This has made it difficult for some homebuyers to afford homes, especially in areas where home prices are already high. In conclusion, Lower Mortgage Rates Boost Buyer Demand lower mortgage rates have been a boon for the housing market, as they have led to an increase in home sales and a rise in home prices. The decline in mortgage rates has made it easier for homebuyers to afford homes, which has led to an increase in demand for homes. While lower mortgage rates have been beneficial for the housing market, they have also led to an increase in home prices, which has made it difficult for some homebuyers to afford homes. Overall, the decline in mortgage rates has been a positive development for the housing market, and it is expected to continue to be so in the future 21.
According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed-rate mortgage are currently at 4.61%, which is still near record lows in comparison to recent history! The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power. Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget. The chart below shows the impact that rising interest rates would have if you planned to purchase a home within the national median price range while keeping your principal and interest payments between $1,850-$1,900 a month. With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year. Act now to get the most house for your hard-earned money. Source: https://www.keepingcurrentmatters.com/2018/05/22/how-current-interest-rates-can-have-a-high-impact-on-your-purchasing-power/
How do you select the members of your team who are going to help make your dream of owning a home a reality? What should you be looking for? How do you know if you’ve found the right agent or lender? The most important characteristic that you should be looking for in your agent is someone who is going to take the time to really educate you on the choices available to you and your ability to buy in today’s market. As the financial guru Dave Ramsey advises: “When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.” Do your research. Ask your friends and family for recommendations of professionals they’ve worked with in the past and have had good experiences with. Look for members of your team who will be honest and trustworthy; after all, you will be trusting them to help you make one of the biggest financial decisions of your life. Whether this is your first or fifth time buying a home, you want to make sure that you have an agent who is going to have tough conversations with you, not just the easy ones. If your offer isn’t accepted by the seller, or they think that there may be something wrong with the home that you’ve fallen in love with, you would rather know what they think than make a costly mistake. According to the Home Buyer and Seller Generational Trends Report: “Buyers from all generations primarily wanted their agent’s help to find the right home to purchase. Buyers were also looking for help to negotiate the terms of sale and to help with price negotiations.” Additionally, “Help to understand the purchase process was most beneficial to buyers 37 years and younger at 75 percent.” Look for someone to invest in your family’s future with you. You want an agent who isn’t focused on the transaction but is instead focused on helping you understand the process while helping you find your dream home. Bottom Line In this world of Google searches, where it seems like all the answers are just a mouse click away, you need an agent who is going to educate you and share the information that you need to know before you even know you need it. Source: https://www.keepingcurrentmatters.com/2018/04/03/what-should-you-look-for-in-your-real-estate-team/
Some Highlights: Source: https://www.keepingcurrentmatters.com/2018/05/11/3-tips-for-making-your-dream-of-owning-a-home-a-reality-infographic/
Adjustable Rate Mortgages (ARM)s are loans whose interest rate can vary during the loan’s term. These loans usually have a fixed interest rate for an initial period of time and then can adjust based on current market conditions. The initial rate on an ARM is lower than on a fixed rate mortgage which allows you to afford and hence purchase a more expensive home. Adjustable rate mortgages are usually amortized over a period of 30 years with the initial rate being fixed for anywhere from 1 month to 10 years. All ARM loans have a “margin” plus an “index.” Margins on loans range from 1.75% to 3.5% depending on the index and the amount financed in relation to the property value. The index is the financial instrument that the ARM loan is tied to such as: 1-Year Treasury Security, LIBOR (London Interbank Offered Rate), Prime, 6-Month Certificate of Deposit (CD) and the 11th District Cost of Funds (COFI). When the time comes for the ARM to adjust, the margin will be added to the index and typically rounded to the nearest 1/8 of one percent to arrive at the new interest rate. That rate will then be fixed for the next adjustment period. This adjustment can occur every year, but there are factors limiting how much the rates can adjust. These factors are called “caps”. Suppose you had a “3/1 ARM” with an initial cap of 2%, a lifetime cap of 6%, and initial interest rate of 6.25%. The highest rate you could have in the fourth year would be 8.25%, and the highest rate you could have during the life of the loan would be 12.25%. Some ARM loans have a conversion feature that would allow you to convert the loan from an adjustable rate to a fixed rate. There is a minimal charge to convert; however, the conversion rate is usually slightly higher than the market rate that the lender could provide you at that time by refinancing.
Hybrid ARM mortgages, also called fixed-period ARMs, combine features of both fixed-rate and adjustable-rate mortgages. A hybrid loan starts out with an interest rate that is fixed for a period of years (usually 3, 5, 7, or 10). Then, the loan converts to an ARM for a set number of years. An example would be a 30-year hybrid with a fixed rate for seven years and an adjustable rate for 23 years. The beauty of a fixed-period ARM is that the initial interest rate for the fixed period of the loan is lower than the rate would be on a mortgage that’s fixed for 30 years, sometimes significantly. Hence you can enjoy a lower rate while having a period of stability for your payments. A typical one-year ARM on the other hand, goes to a new rate every year, starting 12 months after the loan is taken out. So while the starting rate on ARMs is considerably lower than on a standard mortgage, they carry the risk of future hikes. Homeowners can get a hybrid and hope to refinance as the initial term expires. These types of loans are best for people who do not intend to live long in their homes. By getting a lower rate and lower monthly payments than with a 30- or 15-year loan, they can break even more quickly on refinancing costs, such as title insurance and the appraisal fee. Since the monthly payment will be lower, borrowers can make extra payments and pay off the loan early, saving thousands during the years they have the loan.