Mortgage rates haven’t fluctuated much in the past few years and have hovered between 3% and 4% for a 30-year fixed-rate mortgage. These steady rates have helped many home buyers, particularly first-time buyers, afford the American dream. I talked to two capital markets experts that point to the stability of this year’s mortgage market as motivation to buy or refi.
According to RealtorMag.com, 2016 is expected to be a seller’s market as home prices nationwide have increased in recent months. This trend also means that if you’re house hunting, be prepared to act fast when you find your perfect house. Realtor.com® predicts that mortgage rates could reach 4.65% by the end of the year, even though they’re currently just under 4%.
Increasingly, the millennial generation, folks born between the early 1980s and the early 2000s, is becoming a bigger part of the buying market. One big reason is because rent prices nationwide climbed in 2015, while mortgage rates remained stable. This is a continued trend in 2016.
“We want home buyers to realize that they can buy a home today, not some day,” said Bobbi MacPherson, senior product manager at Quicken Loans. “In some housing markets, you can buy a home for the same amount that you’d pay for your first and last month’s rent.”
Quicken Loans Senior Product Manager Katrina Beaubien suggests low down payment programs that help young people and first-time home buyers.
“Rocket Mortgage has been very popular among millennials,” said Beaubien, of the company’s new completely online mortgage process that appeals to young buyers.
She said that younger buyers should take a good look at loan options that allow them to put down less than a 20% down payment on a home.
“I think that some young people forget that buying a home also requires them to purchase a lawnmower, furniture and other items for the home,” she said. “So, low down payment programs really make homeownership possible for many renters.”
Boomerang buyers are people re-entering the housing market for the first time since a foreclosure or short sale. According to a Transunion study, nearly 700,000 boomerang buyers are expected to re-enter the housing market in 2016.
“It’s a good time to get back out there before rates start going up,” said MacPherson. “The rules have changed in recent years in terms of how long you have to wait to buy a home after a short sale or foreclosure. So, people should call one of our Home Loan Experts to learn more about the changes.”
If you’re a boomerang buyer and thinking of getting a home this year, your credit history, recent payment history and the circumstance of your short sale or foreclosure all factor in to your ability to buy again. Mortgage requirements can call for a waiting period of two to seven years before you’re able to apply for a loan again.
MacPherson said an FHA loan is a possible option for folks re-entering the housing market since as little as 3.5% is required as a down payment. FHA loans may also be the fastest route to homeownership with fewer hurdles to cross.
Those interested in refinancing still have time in 2016 to take advantage of the Home Affordable Refinance Program (HARP). According to Fannie Mae, more than 2 million American households saved money by refinancing to more stable loans with lower interest rates under the federal program.
“This is likely the last year that homeowners can take advantage of HARP,” said Beaubien. “There are probably more than 200,000 folks still out there who could save money through the program. They should do it while they still can.”
Mortgage rates are still phenomenally low, which is beneficial for many homeowners wanting to refi in 2016. Our YOURgage loan, allows homeowners to name their own loan term and shave years off of their mortgage, she said.
“A lot of people who qualify and can take advantage of HARP have heard ‘No’ in the past too many times and never tried refinancing again,” said Beaubien. “And others still think that the program is too good to be true!”
For the housing market, 2016 will translate into more graying homeowners. The amount of independence a baby boomer has is a major factor on whether they should change their homeownership status.
Options for boomers remain the same, like any other year: Stay in your home and refinance, downsize into a smaller home or simplify life to become an empty-nest renter. For many aging Americans, homeownership can be expensive and require a significant investment for upgrades and maintenance. Another challenge some boomers face is the status of their health and their level of mobility in order to maintain the upkeep of their home.
“We don’t necessarily have products targeted toward older home buyers,” explained MacPherson. “However, they enjoy the same benefits as anyone else from the continuation of low mortgage rates.”
Key factors for seniors trying to decide whether to buy or rent this year depend on cash-flow needs and home prices and annual rent in their community. Other considerations include annual rent hikes; savings and investment growth; and costs for home maintenance, property taxes and insurance coverage.
“For those baby boomers over the age of 62, a reverse mortgage might be an option as well,” suggested MacPherson. “A reverse mortgage allows a client to tap into the equity in their home and not have any monthly payments.”
Looking ahead, this year is anyone’s guess what will happen with financials and the mortgage market. But most reports predict unchanged rates.
“Since this is a presidential election year, I think that we will see bigger changes on the housing market in 2017,” predicted MacPherson. “So that’s one more reason for people on the fence to take advantage of the great rates this year.”
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