If you’re planning on buying a home in early 2017, you can expect a substantially different housing market from the beginning of 2016.
How could this impact you as a potential homebuyer? While there is still uncertainty in the economy and housing market (and predictions are often wrong), here are some things to consider:
Homes could become less affordable
In an era of higher interest rates, you can expect a higher monthly mortgage payment. For example, a half point interest rate increase could increase your mortgage payment by $75 per month, depending on the financing amount. While this change might be insignificant for the short term, it’s something to consider when committing to a mortgage.
It also makes it even more important to have good credit when applying for a mortgage, as a good credit rating results in a lower interest rate (and lower monthly payments). The easiest way to improve your credit score is to always pay your bills on time. Also check out our video for other tips on raising your credit score.
Shortened loan terms could save you money
While most homebuyers choose 30-year fixed rate mortgages (paid back over 30-year timeframes), choosing a 15-year fixed rate mortgage can save money in a period of higher interest rates. With 15-year loans, you pay less total money on interest, and you pay your loan off faster.
Keep an eye on the stock market
If the stock market continues rising following the biggest election-to-inauguration rise since the 1996 Clinton reelection, there’s a strong chance mortgage rates will move higher. If a major unexpected event causes the market to go significantly lower, mortgage rates could move lower. Should you have a particular mortgage interest rate goal, consider acting quickly on a mortgage if the stock market experiences a dramatic fall.
Watch for news from Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac were created by Congress to provide liquidity (access to funds on reasonable terms), stability and affordability to America’s mortgage market. If mortgage rates continue to rise, the housing market could shrink, and Fannie Mae and Freddie Mac could potentially loosen mortgage guidelines.
As a potential homebuyer in changing housing market, paying attention to news from Fannie Mae and Freddie Mac can help you make a more educated decision.
In a changing housing market, it’s best to stay informed
Because a mortgage is an extremely large financial (and life) decision, we advise staying aware of mortgage news, changing regulations, the economy and your own finances when deciding on a mortgage in 2017.
Stay tuned to this blog for fresh mortgage news and analysis. If you have specific questions about the mortgage process or are ready to take the step into home ownership, contact one of our friendly loan originators today.