Buyers are crying out for mortgages. Should you be?
You may have heard that mortgage interest have been at or near historical lows in recent months, and that has certainly sparked buyer interest. According to the Mortgage Bankers Association, mortgage applications for new construction homes are up 42.2% from December 2020 onwards from December 2019. But while many people are rushing to get a mortgage, should you do the same?
Buy today benefit
If you are a good mortgage candidate and want to buy a home today, chances are you will score an incredibly low interest rate on your home loan. At the time of writing, the mortgage interest rates are on average:
- 2.842% for a fixed loan with a term of 30 years
- 2.599% for a fixed loan with a term of 20 years
- 2.262% for a fixed loan with a term of 15 years
These statistics, of course, represent the average rates nationally, and rates can be more or less competitive where you live. But given how attractive they are overall, that’s a great time to buy alone.
Why do you want to wait?
On the other hand, there isn’t much housing stock on the market right now, so if you’re trying to buy now, you can settle for a property that doesn’t really tick all the right boxes. Also, home prices have risen significantly over the past year, so if you buy today you will find that your savings on mortgage interest are offset or offset by a higher home purchase price.
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Are you a solid mortgage candidate?
It is clear that now is both a good and a bad time to buy a home. But another thing to think about is how likely you are to be approved for a mortgage, and how likely you are to run into the above-mentioned competitive rates (or anything close).
To qualify for a great mortgage rate, you need the following:
- A high credit score (usually in the mid-700s or higher)
- A low debt-income ratio
- A permanent job
- Funds for a down payment
If you don’t meet those criteria, your mortgage application may be rejected or you may be approved for a loan at a higher interest rate than you are willing to pay. So before you think about whether to buy a home now, think about how you will encounter it mortgage lenders. For example, if your credit score could use some work, it might pay off to wait a few months, increase it, and so on than apply for a home loan. Likewise, if you’re in a lot of debt, it may make more sense to spend a few months paying it off and then submitting your mortgage applications.
While rates are extremely competitive right now, chances are mortgage interest remains low for the rest of the year, and possibly beyond. That doesn’t mean they won’t climb a bit, but for the most part, industry experts don’t expect extreme jumps this year. As such, if you not sure if now is a good time to get a mortgage, wait a second. See if the housing stock becomes available and invest some time to make yourself a better loan candidate. This in turn can yield even more savings for you.