19
May
By First Rate Financial Group
Mortgage

How Does A Change In Mortgage Rates Impact A Family’s Housing Budget?

How Does A Change In Mortgage Rates Impact A Family's Housing Budget?

The housing market is extremely competitive right now because mortgage rates are still near record lows. While mortgage rates are rising this year, the rates are still attractive to many individuals and families who are looking to buy a home. At the same time, when mortgage rates change, families need to re-evaluate their budgets. A change in mortgage rates will impact the monthly mortgage payment, so families need to know what they can afford.

Furthermore, because the market is so competitive, sale prices are going up as well. As mortgage rates and home prices rise, families need to determine what their monthly budget is. Even a small increase in the mortgage rate can make a big difference.  

Families Must Do The Math To Figure Out Their Monthly Mortgage Payments

Families need to figure out what monthly mortgage payment they can afford before they make an offer on a home. The factors impacting the monthly mortgage payment are the loan amount, the interest rate, and the repayment period. Many homeowners take out a 30-year mortgage; however, borrowers might be able to adjust the term to meet their specific needs. A few important points to remember include:

  • If the number of years over which the loan is paid back goes down, the monthly payment will likely increase
  • If the interest rate on the loan goes up, the monthly payment will increase
  • If the loan amount goes up, the monthly payment will increase

Families can adjust all of these factors to find the right monthly payment for their budgets.

There Are Ways To Reduce The Interest Rate On A Loan

Finally, there are steps that families can take to reduce the interest rate on their loans. For example, families might be able to put more money down to qualify for a better interest rate. This could reduce the monthly payment, keeping the loan amount within the family’s budget. Or, families might be able to pay down other types of debt such as credit card debt or car loans. If families have a lower debt to income ratio, they might qualify for a better interest rate. This could help families afford a larger house without having to spend more money.

Reevaluate

28
Apr
By First Rate Financial Group
Mortgage

Stimulus Checks And Your New Mortgage

Stimulus Checks And Your New MortgageMost of the focus on stimulus checks has been on “when” they will arrive, but if you are in the market for a new home (and mortgage) you should know how that payment will impact your financing. Part of the latest Covid 19 relief package includes payments and protections for existing borrowers and renters, but what about those who are looking to buy? According to the IRS, here are a few things to know about how your stimulus impacts your upcoming mortgage. 

Stimulus Money Is Not Taxable

Any funds you are qualified to receive are not taxable; this is important to know as you move forward with your purchase because it allows you to properly anticipate your tax burden for the coming year. 

Stimulus Money Is Not Income

While funds from the stimulus can be used however you’d like, including as part of your downpayment, they are not considered income. If you currently qualify for an income-based mortgage incentive or program, having a one-time boost in income could work against your housing plans. If those extra funds counted as income, some families could find themselves no longer qualifying for programs and loans that have income guidelines. 

Stimulus Money Can Be Used For Your Mortgage

Whether you use it for your down payment, pay points to reduce interest, or even pay off remaining debts to improve your ratios, this money can benefit your home buying plans. 

Every debt you pay regularly impacts the amount of money you can afford to borrow for your mortgage — using a stimulus payment to eliminate one or more credit cards or even car payments can increase the amount of monthly payment you can afford. Making these payments can also improve your credit score, which could qualify you for a better rate. 

Since the current stimulus program can benefit home buyers in several key ways, there is no better time to buy than now. Use your stimulus to maximize your buying power and get the best possible mortgage terms and you’ll be able to access a wider variety of homes.

26
Apr
By First Rate Financial Group
Financial Reports

What’s Ahead For Mortgage Rates This Week – April 26, 2021

What's Ahead For Mortgage Rates This Week - April 26, 2021Last week’s scheduled economic news included readings on sales of new and previously-owned homes and weekly reports on jobless claims and mortgage rates.

March Sales of  Previously-owned Homes Dip; New Home Sales Rise

Sales of single-family homes fell in March as demand for homes exceeded availability. 6.01 million previously-owned homes were sold in March on a seasonally-adjusted annual basis; analysts expected a pace of 6.11 million sales based on February’s reading of 6.24 million sales of existing homes. The March reading for sales of pre-owned homes was 3.70 percent lower year-over-year and was the lowest sales pace reported since August 2020.

High demand for homes coupled with low inventories of available homes constricted sales. Lawrence Yun, chief economist of the National Association of Realtors® said, “Sales for March would have been measurably higher had there been more inventory.” Mr. Yun also addressed affordability concerns arising from lean inventories of homes and high demand. “Without an increase in supply, the society’s wealth division will widen with homeowners enjoying sizable equity gains while renters will struggle to become homeowners.” 

The average price of a single-family home in the U.S. rose to $329,100 in March, which indicates year-over-year growth of 17.20 percent in home prices. While a six-month supply of homes for sale indicates an average inventory, the March inventory of homes for sale rose to a 2.10-month supply from February’s 2.0- month inventory of homes for sale.

Shortages of existing homes for sale boosted March sales of new homes, which sold at a seasonally-adjusted annual pace of 1.02 million sales. Analysts expected 888,000 new homes to be sold year-over-year in March based on February’s sales pace of 846,000 new homes sold. Rapidly rising materials costs created obstacles for builders and limited their ability to meet the need for affordable homes, but they raced to meet the ongoing demand for homes.

Mortgage Rates Mixed; Jobless Claims Fall

Average mortgage rates fell below three percent last week; the rate for 30-year fixed-rate mortgages dropped by seven basis points to 2.97 percent. Rates for 15-year fixed-rate mortgages averaged 2.29 percent and were six basis points lower. Rates for 5/1 adjustable rate mortgages rose by three basis points to an average rate of 2.83 percent.

Jobless claims were lower last week with 547,000 new claims filed; analysts expected 603,000 initial claims filed. 586,000 first-time claims were filed in the prior week. Claims were also lower for ongoing claims filed. 3.67 million continuing jobless claims were filed as compared to 3.67 million continuing claims filed in the prior week.

What’s Ahead

This week’s scheduled economic reports include readings from Case-Shiller Home Price Indices, data on pending home sales, and the University of Michigan’s consumer sentiment index. Weekly readings on mortgage rates and jobless claims will also be published.