Will Low Mortgage Rates Continue through 2021?

 

With mortgage interest rates hitting record lows so many times recently, some are wondering if we’ll see low rates continue throughout 2021, or if they’ll start to rise. Recently, Freddie Mac released their quarterly forecast, noting:

“The average 30-year fixed-rate mortgage hit a record low over a dozen times in 2020 and the low interest rate environment is projected to continue through this year. We expect interest rates to average below 3% through the end of 2021. While this is a modest rise from 2020 averages, the recent vote by the Federal Reserve to keep interest rates anchored near zero should keep rates low.”

As shown in the graph below, Freddie Mac is projecting low rates going forward with a modest rise that’s expected to continue through 2022.Freddie Mac isn’t the only authority forecasting low rates with a slight rise. Fannie Mae, The Mortgage Bankers Association (MBA), and the National Association of Realtors (NAR) also anticipate low rates with a small increase as 2021 continues on. Here’s the quarterly breakdown of their projections and how they’re expected to play out over the next year:It’s important to note that, while a small change in interest rates can have a substantial impact on monthly mortgage payments, these rates are still incredibly low compared to where they were just a couple of years ago.

What does this mean for buyers?

Low mortgage rates are creating an outstanding opportunity for current homebuyers to get more for their money while staying within their budget. As the economy gets stronger and we recover from the challenges of 2020, it’s natural for rates to potentially rise in response to a healthier economy. Mark Fleming, Chief Economist at First American, reminds us:

“Rising interest rates reduce house-buying power and affordability, but are often a sign of a strong economy, which increases home buyer demand. By any historic standard, today’s mortgage rates remain historically low and will continue to boost house-buying power and keep purchase demand robust.”

With low rates fueling activity among hopeful buyers, there are a lot of people who are highly motivated and looking for homes to purchase right now. In this environment, it can be challenging to find a home to buy, so a local real estate agent will be key to your success if you’re thinking of buying too. Working with a trusted real estate professional to navigate the process while rates are in your favor might be the best move you can make.

Bottom Line

If you’re ready to buy a home, it may be wise to make your move before mortgage rates begin to rise. Contact a local real estate professional to discuss how today’s low rates can create more opportunities for you this year.

 

Some Highlights

• If you’re on the fence about selling your house, now is a great time to take advantage of sky-high demand, low supply, and fierce buyer competition.
• With buyer demand rising and historically low inventory for sale, if you’re in a position to move, your house may really stand out from the crowd.
• Reach out to a local real estate professional today to get your listing process underway.

What's the Difference between an Appraisal and a Home Inspection?

 

If you’re planning to buy a home, an appraisal is an important step in the process. It’s a professional evaluation of the market value of the home you’d like to buy. In most cases, an appraisal is ordered by the lender to confirm or verify the value of the home prior to lending a buyer money for the purchase. It’s also a different step in the process from a home inspection, which assesses the condition of the home before you finalize the transaction. Here’s the breakdown of each one and why they’re both important when buying a home.

Home Appraisal

The National Association of Realtors (NAR) explains:

“A home purchase is typically the largest investment someone will make. Protect yourself by getting your investment appraised! An appraiser will observe the property, analyze the data, and report their findings to their client. For the typical home purchase transaction, the lender usually orders the appraisal to assist in the lender’s decision to provide funds for a mortgage.”

When you apply for a mortgage, an unbiased appraisal (which is required by the lender) is the best way to confirm the value of the home based on the sale price. Regardless of what you’re willing to pay for a house, if you’ll be using a mortgage to fund your purchase, the appraisal will help make sure the bank doesn’t loan you more than what the home is worth.

This is especially critical in today’s sellers’ market where low inventory is driving an increase in bidding wars, which can push home prices upward. When sellers are in a strong position like this, they tend to believe they can set whatever price they want for their house under the assumption that competing buyers will be willing to pay more.

However, the lender will only allow the buyer to borrow based on the value of the home. This is what helps keep home prices in check. If there’s ever any confusion or discrepancy between the appraisal and the sale price, your trusted real estate professional will help you navigate any additional negotiations in the buying process.

Home Inspection

Here’s the key difference between an appraisal and an inspection. MSN explains:

“In simplest terms, a home appraisal determines the value of a home, while a home inspection determines the condition of a home.”

The home inspection is a way to determine the current state, safety, and condition of the home before you finalize the sale. If anything is questionable in the inspection process – like the age of the roof, the state of the HVAC system, or just about anything else – you as a buyer have the option to discuss and negotiate any potential issues or repairs with the seller before the transaction is final. Your real estate agent is a key expert to help you through this part of the process.

Bottom Line

The appraisal and the inspection are critical steps when buying a home, and you don’t need to manage them by yourself. Reach out to a local real estate professional today so you have the expert guidance you need to navigate through the entire homebuying process.

How to Make the Dream of Homeownership a Reality This Year

 

If you’re dreaming of buying a home this year, start by connecting with a local real estate professional to understand what goes into the process. With a trusted advisor at your side, you can then begin to answer the questions below to set yourself up for homebuying success.

1. How Can I Better Understand the Process, and How Much Can I Afford?

The process of buying a home is not one to enter into lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.

Keep in mind, before you start the process to purchase a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time. If your financial situation has changed recently, be sure to discuss that with your lender as well. Most agents have loan officers they trust and will provide referrals for you.

According to ConsumerReports.org:

“Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget.”

2. How Much Do I Need for a Down Payment?

In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources in the market to potentially reduce the amount you may think you need to put down.

If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.org says:

“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”

Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process.

3. Saving Takes Time: Practice Living on a Budget

As tempting as it is to pass the extra time you may be spending at home these days with a little retail therapy, putting that extra money toward your down payment will help accelerate your path to homeownership. It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score.

A survey of millennial spending shows, “68% reported that shelter in place orders helped them save for their down payment.” Danielle Hale, Chief Economist at realtor.com, also notes:

“If there is any silver lining to the current economic landscape, it’s that mortgage rates are hanging around record lows…Additionally, shelter-in-place orders helped many who were fortunate enough to keep their jobs save for a down payment — one of the largest hurdles of buying a home. The combination of low rates and the opportunity to save is enabling many millennials to move up their home buying timeline.”

While you don’t need to cut all of the extras out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.

Bottom Line

If homeownership is on your dream list this year, take a good look at what you can prioritize to help you get there. To determine the steps you should take to start the process, connect with a local real estate professional today.