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The mortgage industry has gone through some changes in the last three months. If you are looking to finance a home in 2017, it is important that you know what the opportunities are and how to capitalize on them. Over the next 12 months, here are some things to keep in mind as you consider your financing.
Interest rates have spiked and are now sitting at over 4% on the widely popular 30-year fixed-rate mortgages. This change occurred seemingly overnight once Donald Trump was elected president. The markets saw this and rallied, marking a change that meant less regulation, with more opportunity in the investment market. Subsequently, this meant that expense bonds were driving mortgage rates higher. The market was further affected when the Federal Reserve tightened its monetary policy in December 2016. As a result, you can now expect an interest rate on your mortgage anywhere between 4% and 4.5%, depending on your credit score, the loan program and your financial stability. (If you’re not sure where your credit stands, you can view two of your free credit scores, with updates every 14 days, on Credit.com.)
Buying a home is still a solid goal for many, and it is certainly still an attainable one. With higher interest rates, however, affordability will become the main thing to consider, especially the choice between being able to make a mortgage payment and continuing to save. When you qualify for a loan, an interest rate with a half percent difference can translate to around $75 to $80 per month, depending on the amount being financed. While this change may not seem significant, in the long run it is something to take in to consideration when planning to invest in a high-ticket item. Keeping your credit score as high as possible is also important for scoring a good interest rate and keeping your housing payment manageable. (Tips on how to do that here.)
The option to refinance in order to lower your interest rate might not be the best choice for the moment. Rates are not where they were prior to the election, so going from a 30-year mortgage to a new 30-year mortgage and expecting a lower interest rate may not be in the cards for a little while. Here are some refinance opportunities that are more accessible in today’s environment:
Here are some things to keep in mind in 2017.
If you are looking to purchase a house or refinance one you already own, and there is a financial benefit to the terms and rate you qualify for, act on it. Let affordability be the driver of your decision to purchase or refinance a home to meet your financial goals. The market will always change and evolve, and if you can justify the opportunity, it should be something for you to seriously consider.
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