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The latest housing stats for August already point to an increasing inventory amidst moderating demand. The rise in rates is having the Fed’s desired effect on housing, as house price growth began to slow in June. The group continues to anticipate a strong deceleration in home price growth going forward due to the lagged effects of higher mortgage rates and the slowing economy weighing on purchase demand. If you're interested in buying a home, a good bet is to keep tabs on your local housing market to track inventory -- and to also pay attention to how mortgage rates are trending. While you may fare well buying a home in the next few weeks, buying in the next few months could be your ticket to a lower purchase price and a less stressful house hunt on the whole.
But whether this is a good time for you to buy a house also depends on your financial situation, life goals and readiness to become a homeowner. Effective immediately, first-time home buyers get automatic mortgage rate discounts from Fannie Mae and Freddie Mac. Sellers retook lost leverage last month but not enough to have the upper hand in negotiations. Between now and mid-February, buyers will have mismatched opportunities to buy great homes at lower, more affordable prices. The mortgage credit availability again decreased in August as investors reduced their offerings of ARM and non-QM loan programs.
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If you stay in your home for the entirety of the 30-year term, there’s a fair chance that mortgage rates will dip again. If they do, you always have the option of refinancing your loanin order to take advantage of the lower rate. Although refinancing does come with a processing fee, it can often save homeowners thousands of dollars overall. Of course, it’s going to sting to see mortgage rates rise from a record low of 2.7% to 6.4% where they are now . This dramatic jump means that homebuyers have to cope with a more limited budget, and larger, newer homes in desirable neighborhoods are further out of reach.
Should I refinance my mortgage now?
But as 2022 moves along, that's becoming increasingly less feasible, with rates climbing from week to week. Secondly, housing inventory is extremely limited, and that's giving buyers fewer homes to choose from. It's also putting buyers in a position where they need to engage in bidding wars to get an offer accepted. But bidding wars are notorious for raising home prices, which helps explain why homes are so expensive today.
Deciding on the right time to buy a home isn’t just about money — you also have to be mentally prepared. It takes a higher level of responsibility than renting, as you are the only person responsible for maintenance, repairs and upgrades. When you rent, these big responsibilities, as well as everyday maintenance, fall to the landlord instead. Buying before you’re financially ready or buying a home that’s too expensive could leave you at risk of defaulting on your mortgage down the road, or ultimately losing your home to foreclosure. On the flipside, if you want more homes to choose from and don’t mind paying a premium, spring and early summer are good times to buy a house, as April has the most new listings. Locking in the mortgage rate until the loan closes to protect against further rate increases.
Is Now a Good Time to Buy a House?
The problem is, it’s not easy to time when home prices will be low and the number of homes for sale will be high. Even if you could, you’d have to be in the right place in your ever-changing season of life and financial situation. Use an online mortgage calculator to see how much you can realistically afford. Of course, how much you can actually afford varies person to person; no single rule works for everyone. It takes a minimum FICO score of 620 to qualify for a conventional loan; however, applicants with at least a 740 receive the best interest rates . And in fact, the average FICO score for first-time homebuyers is 746, according to a recent report from Fannie Mae.
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With an FHA loan or VA loan, for example, you can put down a lower down payment than 20% while avoiding private mortgage insurance. I just think that a lot of people are jumping in with both feet based on all the hype that you hear in the news today, that the market is appreciating and you know, you should, you should cash out. It's real easy to hear about the guy who made $300,000 on his house. If they have time for you now they'll have time for you when you're in the middle of the biggest purchase that you'll ever make. There are lenders out there who won't even answer their phone. Don't call them back, talk to all of your friends and, you know, talk to your colleagues at work.
This means the demand for homes outpaces the available inventory. As a result, buyers have to compete with one another for the houses that are on the market. If you’re struggling to buy your first home, you still have options. One study from the real estate firm RentCafe ranked Bloomington, Illinois, as the city where it's easiest to save for a down payment on a starter home.
Unless your credit score is really competitive, you may not qualify for the best mortgage rates, which means you could end up paying a higher price for a home without the savings of a lower rate. While, in some cases, first-time buyers may be able to buy a home with as little as a few percentage points down, it’s very risky. With such little equity, there’s a greater chance that, in a down market, your mortgage will be “underwater,” and you will owe more than what the home is worth. That’s what happened to many property owners during the housing crash of 2008.
There was a point recently when it was more than possible to lock in a 30-year mortgage at an interest rate of roughly 2.7% to 2.8%. Nowadays, the 30-year mortgage is sitting at roughly 3.15%, and while that's still a great deal on a historical basis, it's not nearly as competitive a rate as 2.8%. You'll just need to shop around to find the best mortgage lender for you. To enjoy the benefits of homeownership sooner rather than later.
First, get your mortgage pre-approval completed as soon as possible. Your mortgage pre-approval uses today’s mortgage rates to tell you how much home you can afford and sets realistic boundaries for your home search. Thankfully, first-time buyers can achieve their American Dream of homeownership without saving 20% for a down payment.
