With interest rates likely heading up, many would-be homebuyers are rushing to lock in mortgages before borrowing gets even more expensive. While snagging a lower interest rate will make your monthly payments more affordable and save you money in the long run, buying a home right now may not be the best move.
1. You're new to your job Being in a new employment position can spell trouble from a homeownership perspective on more than one front. First, if you don't have an established payment history, you may have trouble getting approved for a mortgage in the first place.
Even if you are approved, you may want to wait a few months and make sure your new role works out before taking on the financial responsibility of owning property. Imagine that after a month or two on the job, both you and your employer agree that your role just isn't a good fit. In a best-case scenario, you'll be stuck in a job you don't like in order to cover your mortgage payments. In a worst-case scenario, you'll be let go without much warning and lose your income in the process. You're far better off waiting things out a bit and making sure your job situation really is stable before committing yourself to a mortgage. 2. You can't afford the down payment While you don't necessarily have to make a 20% down payment to purchase a home, if you don't save that amount, you'll face what could be a rather long-term consequence: private mortgage insurance (PMI). PMI is usually paid as a monthly premium on top of your regular mortgage payment, and it's typically calculated as 0.5% to 1% of the value of your mortgage. If you take out a $250,000 mortgage at 1% PMI, you'll spend an extra $208 a month to live in your home. Though putting less money down and paying PMI can be a good solution for a high earner with limited savings, for many people, PMI makes it even more difficult to keep up with housing payments. If you can't afford to put 20% down on your home, you may want to wait a year or two, save aggressively, and buy at a point where PMI won't come into play. 3. Buying a home will wipe out your savings Though everyone needs an emergency fund, having extra reserves is especially crucial for homeowners. That's because when you buy a home, you never know what hidden expense is lurking where you'd least expect it. If you don't have enough in the bank to make a down payment on your home while also retaining enough to cover three to six months of living expenses, you'd be wise to consider holding off until you have more in savings. Imagine you use all of your savings to buy your home and come across a $10,000 repair several months later. Without an emergency fund, you'll probably have no choice but to take on debt to cover that expense. Even if nothing actually goes wrong with your home, you never know when you might fall ill, get injured, or encounter another scenario where you're out of work for months at a time. If you don't have emergency savings in place, you'll risk not only racking up debt but quite possibly losing your home. And that's not a risk you want to take. If you are going to move forward with buying a home, don't make the mistake of rushing through the process. While interest rates may rise, waiting an extra month or two shouldn't make a huge difference in the grand scheme of things, and it could buy you more time to do your research and shop around for the best rate.
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Employment Situation: Nonfarm Payrolls and Civilian Unemployment February 2017
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Retail Sales: January 2017
It's a tough market for homebuyers. Prices are high and supply of available homes is low. And while the Federal Reserve's rate hike could make home buying more expensive, house hunters shouldn't start panicking yet. The Fed increased its benchmark interest rate by one-quarter of a percentage point on Wednesday. The Fed doesn't directly set mortgage rates, but its actions can affect the housing market. Mortgage rates tend to move with the government's 10-year Treasury note, which serves as a benchmark for many forms of credit, including mortgages. Interest rates on the notes have already risen since Donald Trump was elected president and on signals the Fed would continue to tighten monetary policy. But Wednesday's hike was widely expected, meaning the markets had already priced it in. So many experts don't see rates moving much higher in the coming weeks. "The last couple of times the Fed made a move, the rates firmed up in advance of the decision, and when it happened they kind of faded," said Keith Gumbinger , vice president of HSH.com. The Fed has now raised rates three times since the end of 2015. Following the first hike in December 2015, mortgage rates started 2016 with a drop for the first few weeks.
The Redfin Housing Demand Index decreased 8.5 percent from January’s record-high, to a seasonally adjusted level of 118 in February. Despite the dip from the previous month, this was the strongest February for homebuyer demand since at least 2013, the first year measured by the index.
The Demand Index is based on thousands of Redfin customers requesting home tours and writing offers. A level of 100 represents the historical average for the three-year period from January 2013 to December 2015.
Compared to January, the seasonally adjusted number of buyers requesting tours was down 8.2 percent in February, while the seasonally adjusted number of buyers writing offers was down 7.7 percent.
“The only factor holding back sales this spring is supply,” said Redfin chief economist Nela Richardson. “Limited inventory, particularly for starter homes, has put a crimp in the 2017 market. We expect to see more listings hit the market this spring, but there will still not be enough inventory to match homebuyer demand.”
While lower than January’s all-time high, homebuyer demand in February remained well above levels seen around this time last year. Demand was up 20.0 percent compared to the previous February, led by a 25.7 percent year-over-year increase in homebuyers requesting tours and an 11.9 percent increase in buyers making offers.
February continued a trend of limited selection for homebuyers, who saw 7.2 percent fewer new listings hit the market, and 13.9 percent fewer homes on the market overall than in February 2016.
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Retail Sales: January 2017__________________________________________________
The number of homebuyers considering a riskier mortgage — a kind of loan that became notorious during the housing boom and crash — has doubled since the presidential election.
Last week, 9 percent of total home loan applications were for adjustable-rate mortgages, or ARMs. That’s twice the level seen in the first week of November 2016. It’s also the highest level since October 2014, according to the Mortgage Bankers Association.
“We’ve had more inquiries about ARMs, hesitantly, but the questions are there,” says Pava Leyrer, chief operating officer of Northern Mortgage Services. “It’s just not about the rate. Housing is so extremely tight with bidding wars that people feel pressured to raise their price and need a lower rate, but in many cases, it’s not enough to make a difference.”
The average rate for 30-year fixed-rate mortgages was at 4.46 percent last week, while the 30-year fixed-rate loan backed by the FHA — popular among first-time homebuyers — increased to 4.33 percent from 4.29 percent the week before.
By contrast, the average rate for a 5/1 ARM — fixed rate for five years and variable after that — fell to 3.41 percent from 3.45 percent.
The difference can really add up. The monthly payment for a 30-year loan at the current rate on a $180,000 mortgage is $807 (not including taxes and insurance). For a 5/1 ARM at the current rate, it’s $710 (without taxes or insurance). However, that payment can adjust either up or down after five years, depending on the interest rates at the time.
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Millennials in Ohio are getting the most affordable mortgages, with Toledo, Akron, Lakewood and Dayton claiming four of the top 10 cities with the lowest average mortgage amounts for the age group, according to LendingTree. California, however, is on the opposite end of the spectrum, with four of the 10 cities with the highest average mortgage amounts: San Francisco, San Jose, Los Angeles and San Diego.If you're considering buying a new home — regardless of where you live or how old you are — it's important to shore up your credit before applying for a mortgage. That's because it's going to play a major role in whether you can actually get a mortgage and what kind of rates you'll end up paying. You'll want to clean up your credit if necessary and make sure there aren't any errors weighing down your scores. If you spot them, here's how to address any errors that you may find.Now, without further ado, here are the top 25 cities where millennials are buying homes.
Home inventory has dropped for eight consecutive quarters, making it harder to find a home, according to Trulia’s research. “In 2017, homebuyers are up against a very competitive market, where there are fewer homes for sale that cost more than they did last year,” says Trulia Senior Economist Cheryl Young. “The Trulia Inventory and Price Watch found that housing inventory hit its lowest level on record, having fallen by 5.1% from a year ago.”
Hit hardest? First-time homebuyers. There’s a larger inventory of trade-up homes and luxury homes than starter homes. As prices rise, people who might have been looking for a luxury home may now be in the trade-up market. Those who would have been in the trade-up market are buying starter homes or hanging on to the homes they already have. This means first-time buyers have to put in extra effort to land a home.
Understanding the current real estate market can keep you from being blindsided. “Short supply is the dominant issue this spring,” says Bruce Ailion, an Atlanta, GA, real estate agent and attorney. “Homes that are priced at market and are in attractive condition sell in days.” Act quickly when you find something you like, and be flexible with seller requests, he advises — two tactics that can help you buy a home in a competitive market.
It's a tough market for homebuyers. Prices are high and supply of available homes is low.And while the Federal Reserve's rate hike could make home buying more expensive, house hunters shouldn't start panicking yet.The Fed increased its benchmark interest rate by one-quarter of a percentage point on Wednesday.The Fed doesn't directly set mortgage rates, but its actions can affect the housing market.Mortgage rates tend to move with the government's 10-year Treasury note, which serves as a benchmark for many forms of credit, including mortgages. Interest rates on the notes have already risen since Donald Trump was elected president and on signals the Fed would continue to tighten monetary policy.But Wednesday's hike was widely expected, meaning the markets had already priced it in. So many experts don't see rates moving much higher in the coming weeks."The last couple of times the Fed made a move, the rates firmed up in advance of the decision, and when it happened they kind of faded," said Keith Gumbinger , vice president of HSH.com.The Fed has now raised rates three times since the end of 2015. Following the first hike in December 2015, mortgage rates started 2016 with a drop for the first few weeks.
1. You're new to your jobBeing in a new employment position can spell trouble from a homeownership perspective on more than one front. First, if you don't have an established payment history, you may have trouble getting approved for a mortgage in the first place.
Even if you are approved, you may want to wait a few months and make sure your new role works out before taking on the financial responsibility of owning property.Imagine that after a month or two on the job, both you and your employer agree that your role just isn't a good fit. In a best-case scenario, you'll be stuck in a job you don't like in order to cover your mortgage payments. In a worst-case scenario, you'll be let go without much warning and lose your income in the process. You're far better off waiting things out a bit and making sure your job situation really is stable before committing yourself to a mortgage.2. You can't afford the down paymentWhile you don't necessarily have to make a 20% down payment to purchase a home, if you don't save that amount, you'll face what could be a rather long-term consequence: private mortgage insurance (PMI).PMI is usually paid as a monthly premium on top of your regular mortgage payment, and it's typically calculated as 0.5% to 1% of the value of your mortgage. If you take out a $250,000 mortgage at 1% PMI, you'll spend an extra $208 a month to live in your home.Though putting less money down and paying PMI can be a good solution for a high earner with limited savings, for many people, PMI makes it even more difficult to keep up with housing payments. If you can't afford to put 20% down on your home, you may want to wait a year or two, save aggressively, and buy at a point where PMI won't come into play.3. Buying a home will wipe out your savingsThough everyone needs an emergency fund, having extra reserves is especially crucial for homeowners. That's because when you buy a home, you never know what hidden expense is lurking where you'd least expect it. If you don't have enough in the bank to make a down payment on your home while also retaining enough to cover three to six months of living expenses, you'd be wise to consider holding off until you have more in savings.Imagine you use all of your savings to buy your home and come across a $10,000 repair several months later. Without an emergency fund, you'll probably have no choice but to take on debt to cover that expense.Even if nothing actually goes wrong with your home, you never know when you might fall ill, get injured, or encounter another scenario where you're out of work for months at a time. If you don't have emergency savings in place, you'll risk not only racking up debt but quite possibly losing your home. And that's not a risk you want to take.If you are going to move forward with buying a home, don't make the mistake of rushing through the process. While interest rates may rise, waiting an extra month or two shouldn't make a huge difference in the grand scheme of things, and it could buy you more time to do your research and shop around for the best rate.