Mortgage interest rates, as reported by Freddie Mac, have increased over the last several weeks. Freddie Mac, along with Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors, is calling for mortgage rates to continue to rise over the next four quarters.
This has caused some purchasers to lament the fact that they may no longer be able to get a rate below 3.5%. However, we must realize that current rates are still at historic lows.
The above chart shows the average mortgage interest rate over the last several decades. Across the nation as well as here in Baton Rouge rates continue to be historically low.
Though you may have missed getting the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.
– Glenda Daughety
The American Dream of Baton Rouge homeownership is alive and well. Recent reports show that the US homeownership rate has rebounded from recent lows and is headed in the right direction. The personal reasons to own differ for each buyer, but there are many basic similarities.
Today we want to talk about the top 5 financial reasons you should own your own home.
- Homeownership is a form of forced savings – Paying your mortgage each month allows you to build equity in your home that you can tap into later in life for renovations, to pay off high-interest credit card debt, or even send a child to college. As a renter, you guarantee that your landlord is the person with that equity.
- Homeownership provides tax savings – One way to save on taxes is to own your own home. You may be able to deduct your mortgage interest, property taxes, and profits from selling your home, but make sure to always check with your accountant first to find out which tax advantages apply to you in your area.
- Homeownership allows you to lock in your monthly housing cost – When you purchase your home with a fixed-rate mortgage, you lock in your monthly housing cost for the next 5, 15, or 30 years. Interest rates have remained around 4% all year, marking some of the lowest rates in history. The value of your home will continue to rise with inflation, but your monthly costs will not.
- Buying a home is cheaper than renting – According to the latest report from Trulia, it is now 37.4% less expensive to buy a home of your own than to rent in the US. That number varies throughout the country but ranges from 6% cheaper in San Jose, CA to 57% cheaper in Detroit, MI.
- No other investment lets you live inside of it – You can choose to invest your money in gold or the stock market, but you will still need somewhere to live. In a home that you own, you can wake up every morning knowing that your investment is gaining value while providing you a safe place to live.
Before you sign another lease, let’s get together to help you better understand all your options.
Every Hour in the US Housing Market:
- 624 Homes Sell
- 347 Homes Regain Positive Equity
- Median Home Values Go Up $1.13
Knowing your credit score or getting a recent copy of your credit report is one of the first steps that you can take toward knowing how ready you are to start the home buying process in Baton Rouge.
Make sure all the information listed on your report is accurate and work to correct any mistakes. The higher your credit score, the more likely you will be to receive a better interest rate for your mortgage, which will translate into more ‘home for your money.’
Many potential buyers believe that they need a 750 FICO® Score or higher to be able to purchase a home. The truth is that according to Ellie Mae’s Origination Report, over 53% of loans were approved with a FICO® score under 750 last month!
Here are some tips for improving your credit score:
- Make payments, including rent, credit cards, and car loans, on time.
- Keep your spending to no more than 30% of your limit on credit cards.
- Pay down high-balance credit cards to lower balances, and consider balance transfers to free up credit.
- Check for errors on your credit report and work toward fixing them.
- Shop for mortgage rates within a 30-day period — too many spread-out inquiries can lower your score.
- Work with a credit counselor or a lender to improve your score.
Once you know your score, your next step will be finding a lender and getting pre-approved for a mortgage. Doing this will ensure that you know your budget before you start looking for your dream home. For more buyer advice go to GlendaDaughety.com/buyeradvice
A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainty about the buying process. A specific cause for concern tends to be mortgage qualification.
For many, the mortgage process can be scary, but it doesn’t have to be!
In order to qualify in today’s market, you’ll need to have saved for a down payment (73% of all buyers made a down payment of less than 20%, with many buyers putting down 3% or less), a stable income and good credit history.
Throughout the entire home buying process, you will interact with many different professionals, all of whom perform necessary roles. These professionals are also valuable resources for you.
Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests you follow:
- Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO® Score of all closed loans in September was 724, according to Ellie Mae.
- Start gathering all your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
- Contact a professional – your real estate agent will be able to recommend a loan officer that can help you develop a spending plan, as well as determine how much home you can afford.
- Consult with your lender – he or she will review your income, expenses, and financial goals to determine the type and amount of mortgage you qualify for.
- Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change), and demonstrates to home sellers that you are serious about buying!
Do your research, reach out to our Baton Rouge professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner in the Baton Rouge real estate market.