Here are the highlights:
- When it comes to buying or selling a house right now, misconceptions abound. This makes it harder to act with confidence in our present environment.
- But digging into five mainstream myths about today’s housing market can provide you with more clarity.
- Along with busting these myths, it’s important to work with a skilled, local loan officer every step of the way, who can help you separate fact from fiction.
Talk about convenient. Our free LoanFly app lets you search houses, connect with a local loan officer, prequalify for a mortgage, and manage your loan docs, all in one place.
What else to know: Mortgage rates are still low — but rising
In 2021, mortgage rates have started to creep up, but compared to the averages of past decades, they remain at record lows. Nonetheless, any time mortgage rates change, it can impact the amount you’re able to borrow.
Freddie Mac predicts:
“We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4 percent in the fourth quarter of 2021, rising to 3.8 percent in the fourth quarter of 2022.”
As you prepare to buy a home – either as a first-time buyer or as a seller who is buying a new house – it’s critical to know your monthly budget and exactly how much house you can afford. (You can find this out by prequalifying.) Even when there’s a slight jump in rates, it can greatly affect your buying power, or the amount you’re able to purchase.
A median-priced home is currently estimated at $334,500. Using a $300,000 house as a simple example within this range, you can see how much a small adjustment in mortgage rates may impact your monthly P&I (principal and interest) payments.
- When the fixed-rate for a mortgage is at 2.75 percent: Your monthly payment for a $300,000 house may be $1,225.
- When the fixed-rate is 3.25 percent: Your monthly payment may rise to $1,306.
- If the fixed-rate is 3.75 percent: Your monthly payment may rise to $1,389.
- If the fixed-rate is 4.25 percent: Your monthly payment may rise to $1,478.
Let’s say you prequalify to buy a house and find out that you have a $1,200 to $1,250 budget for your monthly payment. As the example shows, whenever mortgage rates rise, your home loan amount must decline to maintain your monthly range. So, you might have to search for houses in a lower price bracket as rates increase if you want to stay within your budget.
This is exactly why it can be so smart to close on a mortgage — or at least lock in a rate with a lender — while mortgage rates remain low. Do this, and you’ll be able to borrow a larger amount. You’ll automatically have more buying power when purchasing a house.
Mark Fleming, First American’s Chief Economist, states:
“Monthly payments have remained manageable despite soaring home prices because of low mortgage rates. In fact, monthly payments remain below the $1,250 to $1,260 range that we saw in both fall 2018 and spring 2019, but they are on track to hit that level this spring. Although they remain low, mortgage rates have begun to increase…”
Remember, housing authorities expect rates to continue to rise moderately throughout 2021. As a buyer or seller, time is of the essence if you want to secure the most competitive rate available so you can afford your dream house.
Now you know the truth. What’s next?
Whether you’re buying or selling, reach out to a local loan officer who’s equipped to help you move quickly through the complexities of today’s housing market. Get personalized service and an affordable mortgage you feel good about.
*MBS Highway payment estimate, rounded to the nearest dollar amount. Rates listed (as of 5/20/2021) are for illustrative purposes only and are subject to change.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources deemed reliable but not guaranteed.