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Tips for home buyers worried about higher mortgage rates

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Mortgage rates show no signs of returning to the historic lows seen early in the pandemic.

The average interest rate for the most popular long-term mortgage (30 year fixed) has more than doubled from a year ago. Freddie Mac, buyer of government-backed mortgagesThe rate stood at 6.58% as of Nov. 23, up from 3.1% last year.

Average monthly mortgage payments rose to $2,012 nationwide last month, driven by rising interest rates and soaring home prices. A new all-time high, according to the Home Loan Bankers Association.Households in the Philadelphia area Had to add about $20,000 a year Last month we were able to buy more median homes than we did last year, According to Redfin.

As homeowners tied to lower mortgage rates stay put The number of new homes for sale is declining.

Homeseeker compares current rates to last year’s rates and “they’re thinking, ‘Wow, I missed the boat,'” says Haddonfield-based Agent 06 chief executive and records broker Angela Burnshaw said. Concierge Real Estate Firm. “It’s the same thing we hear over and over again.”

Despite higher interest rates, homebuyers still or you’ll need to buy itthere are options.

“Don’t let the interest rate scare you away from getting your dream home,” said Saunda Love, senior sales manager at Allied Mortgage Group, based in Barra Sinwid.

Buyers often ask lenders, “How much interest can I get?” But the more important question is, “What are the different programs that might fit my profile?” Julius S. Sharpe Jr. is a senior CRA based in Philadelphia (Community Reinvestment Act) Mortgage Officer at Fulton Mortgage Co

“You may ask for a rate. I can match the rate Joe Smith puts you through, but have you seen this program?” he said.

” read more: Homebuyers this summer saw more swings in mortgage rates than at any time since 1987

Buyers may be attracted by low interest rates, but they don’t realize that those interest rates come with high upfront fees on top of closing costs. Buyers also tend to think that lower interest rates mean lower payments, but “depending on the structure of the mortgage program, you may be able to take advantage of programs with higher interest rates, but with lower monthly payments.” Mr Sharp said.

Interest rates are difficult to predict, was unstable. Average 30-year fixed rate mortgage Around 3.2% by early 2022no one predicted that they would jump About 70% this year.

Homeowners can pay to Refinance your mortgage later if interest rates go down.

The mortgage rates and programs a buyer may qualify for depend on the strength of their financial situation. Lenders look at the buyer’s credit, income, savings, and debt to try to predict whether the homeowner is likely to be able to repay the loan.

Camille Lawson, a Chester County-based loan officer at Primary Residential Mortgage Inc., said, “They need to assess the risk involved in giving you any sum. will vary based on the financial information of

” read more: Limited credit history and low credit scores of aspiring black homeowners help widen racial disparity among homeowners

If a homebuyer has a high income, a good credit score, a consistent work history, low debt, and a lot of money saved up, “you look very attractive,” she said. Falling below or barely meeting minimum financial requirements “looks very risky,” she said.

“A lot of times people may be thinking, ‘I’m being duped’ or ‘They don’t want to give me anything,'” Lawson said. “Don’t think so.”

Buyers can talk to lenders, financial advisors and housing counselors about ways to improve their financial profile.

” read more: How a Philadelphia millennial couple paid off $150,000 student loans ahead of schedule

“There could be something that’s stopping you from getting the prime rate,” said Love of Allied Mortgage Group. “They may need to pay something back to qualify for better interest rates.”

Buyers can finally save money debt repayment And then use that money to get a lower rate in return for a higher down payment, Love said.

Buyers with credit scores Our 700+ customers have more choices and access better rates, while buyers with lower credit scores can take advantage of the program. Both the Federal Housing Administration and the U.S. Department of Veterans Affairs “have good programs in place” for people whose credit scores are in his 500s and whose interest rates are still reasonable, said Haddonfield of NFM Lending. said Dana Gounaris, vice president of the office and manager of his producing branch. .

“There are so many loan programs out there for all kinds of financial situations,” he said.

” read more: 7 habits of people with high credit scores

A good lender looks at a buyer’s unique situation to find the best loan for their customer. For example, certain mortgage programs are only available to veterans, doctors, or teachers.

Other loans may make sense if the buyer plans to move within a few years. Two people with the same income may have different spending and savings, so different programs may be available at different rates.

“Give the loan officer all the information they need to get them to approve what you can really qualify for,” Love said.

When a buyer chooses a loan, they can also make choices that affect the mortgage interest rate. For example, you can pay points to lower the rate. 1 point is 1% of the loan amount.

Buyers should consult multiple lenders as different lenders offer different types of loans with different interest rates and terms. Lenders evaluate the buyer’s overall financial situation, determine if and how the client can improve their profile, and determine which programs will benefit them the most.

“It’s amazing what a good lender can do,” said real estate broker Barnshaw. “They are like wizards.”

Sharp said good lenders should offer “a menu of different programs” based on the buyer’s qualifications. Lenders encourage buyers to seek and consider all options.

” read more: Common Mortgage Mistakes to Avoid

For example, 30-year fixed-rate mortgages are the most popular, Variable rate mortgages are growing in popularity the rate is Historically low levels early in the pandemicThe homeowner pays the first interest rate. Usually lower than fixed rate loansAfter a certain number of years, the interest rate is adjusted periodically based on economic conditions.

Buydown programs are also growing in popularity. The seller provides the funds upon closing and the buyer pays a lower interest rate for his first year or years. For example, if a buyer purchases her 30-year He 3-2-1 Buy-Down mortgage at an interest rate of 6.99%, in the first year his interest rate is 3.99% and in the second year he is 4.99%. , the third year he will be 5.99%. 6.99% for the rest of the year. (3-2-1 means an interest rate cut of 3 points in the first year, 2 points in the second year, and 1 point in the third year.)

These programs are particularly attractive to buyers who will earn higher incomes in the coming years.

Due to rising mortgage interest rates and slowing home sales, mortgage industry layoffs Lenders competing for a small number of homebuyers.Nationwide, the number of mortgages initiated in the third quarter of this year was 47% decrease YoY — It’s the biggest annual decline in 21 years, according to national property tracking firm Attom.

Lenders are trying to attract customers, some offering new deals.

” read more: Delaware County real estate firm lays off 166 people as housing market slows

For example, in September, national financial institution Rocket Mortgage launched a program to reduce buyers’ mortgage interest rates by 1% during the first year of the loan.through “Inflation Buster” program, homeowners will have their monthly payments reduced, and Rocket Mortgages will cover the difference. Buyers are eligible for the offer if they confirm the rate by the end of the year.

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