How Affordable Are USDA Home Loans?
Home buyers looking for a zero downpayment mortgage with low monthly payments should consider USDA home loans.
The United States Department of Agriculture (USDA) loan, also known as the Rural Development (RD) loan, requires no downpayment and is available to lower-credit applicants.
Interest in these loans is growing as buyers learn their benefits. More than 166,000 families used a USDA loan in fiscal year 2015 alone, according to the agency.
Buyer enthusiasm is not surprising. The USDA loan is the only zero-down loan on the market today for home buyers without military service history.
Rural Development loans are available based on location of the property, not life experience. Specifically, USDA buyers need only to find a home in a “rural” area as defined by USDA. But the definition of rural is quite liberal: about 97 percent of all U.S. land mass is eligible.
USDA loans come with ultra-low rates and less expensive mortgage insurance, beating affordability of even FHA loans.
Most home buyers are surprised at just how affordable these loans are.
USDA Rates And Mortgage Insurance
USDA loans allow 100% financing, meaning no downpayment is required. This is because USDA loans are insured, or backed, by the U.S. government.
Zero downpayment does not mean buyers pay higher rates. USDA loans offer similar or lower rates than can be found with FHA or conventional loans.
Mortgage insurance is also less expensive, costing about $29 per month for every $100,000 borrowed.
For a $100,000 loan balance, FHA mortgage insurance costs $70 and conventional 97 would be around $80 per month.
USDA loans, however, have a slight disadvantage compared to Conventional 97 in that they come with an upfront fee of 1.00% of the loan amount. The fee is not required in cash at closing. Rather, the amount is wrapped into the principal balance and paid off over time.
This is the same model as applies to FHA loans, which require a 1.75% financed fee upfront.
USDA Costs Compared to FHA and Conventional 97
The fact that USDA loans don’t require a downpayment saves the home buyer a substantial amount upfront. This reduces the amount of time it takes a buyer to become ready to buy a home.
Other low-downpayment options, such as FHA loans or a Conventional 97, still require a downpayment of 3.5% and 3% respectively.
On the average home price of about $250,000, a USDA borrower would need $8,750 less upfront than an FHA borrower.
USDA loans come with a higher balance, due to low downpayment, but that’s somewhat offset by lower rates and more affordable mortgage insurance.
Assuming a home price of $250,000, upfront and monthly costs of these three loan types are as stated below.
Downpayment
USDA: $0
FHA: $8,750
Conventional 97: $7,500
Loan Amount
USDA: $252,500
FHA: $245,471
Conventional 97: $242,500
Monthly Principal, Interest, And Mortgage Insurance
USDA: $1,280
FHA: $1,310
Conventional 97: $1,385
Keep in mind that these payments do not include other costs like property taxes and homeowner’s insurance, and are based on sample, and not live, rates and APRs. However, this cost example shows that USDA requires a similar monthly payment compared to FHA, without the 3.5% downpayment.
Compared to a Conventional 97, the USDA loan has a lower upfront and monthly cost.
Even though the USDA loan amount is higher due to zero downpayment, monthly payments are the same or lower than the other options.
Monthly payment is more important than principal balance for many buyers. Lower monthly costs make the USDA loan more affordable for families with tight budgets.
Minimum Credit Score For A USDA Mortgage
USDA home loans have other benefits besides low initial and monthly costs. They also have flexible credit requirements compared to other loan types.
For a USDA loan, home buyers will only need a credit score of 640. Fannie Mae guidelines set the minimum credit score at 620 for a conventional 97, although lenders will typically set a higher minimum of 640 to 680.
The only popular loan program with a lower required credit score is FHA, which only requires a credit score of 580.
USDA Income Limits Ensure Availability For Moderate Earners
USDA home loans are available to buyers at or below certain income limits. This guidelines is set in place to make sure the program is used by those who need it most.
But the income limits for a USDA are generous. To be USDA eligible, the home buyer can make up to 115% of the area’s median income. Assuming a family of four, below are the annual income limits for some major areas:
Los Angeles area: $98,200
Chicago area: $87,400
Denver area: $94,600
Larger families are permitted to make even more. For example, a family of five or more in the Los Angeles area could make $129,600 and still be eligible.
Because USDA loans are backed by the United States Department of Agriculture, they offer benefits that other programs cannot, like small upfront costs and ultra-low rates.
The loose requirements, easy affordability and 100% financing available with a USDA mortgage make it a difficult option to beat.
Get a USDA rate quote, which comes with an property and income eligibility check. All quotes include access to your live credit scores and a personalized monthly payment estimate.
Want to get the most from your tax return this year? Here’s a hint: Don’t just file the standard deduction.
Uncle Sam is back yet again to collect taxes (argh!). But there’s a bright side: He may take a smaller bite if you’re a homeowner. No matter what type of residential property you own — mobile home, single-family residence, townhouse, condominium, or co-op apartment — you’re eligible for certain tax breaks. But you’ll need to put in the extra work and itemize your taxes if you want maximum savings.
Unfortunately, if you’re a first-time homebuyer, “you might be so used to claiming the standard deduction that it doesn’t even dawn on you to itemize,” And considering that the standard deduction is only $6,300 for singles and $12,600 for married couples filing jointly in 2016, it’s probably worth it for you to itemize from a tax-savings perspective. By itemizing, you can take advantage of specific deductions and credits.
What’s the difference between a tax credit and a tax deduction?
Tax credits give you a dollar-for-dollar reduction on the amount of taxes you owe, whereas a tax deduction reduces how much of your income is subject to taxes. It’s a difference that’s good to know, since that means tax credits are ultimately more valuable than deductions (although there are fewer of them for homeowners to claim). Here’s a closer look at the deductions and credits you may be eligible for.
What is a home mortgage interest deduction?
The IRS allows you to deduct the interest you pay your lender. This is one of the biggest deductions for those who itemize. You’ll find the amount of interest you paid to your lender on your Form 1098 Mortgage Interest Statement. However, you’re allowed to deduct interest only up to $1 million on the loan. Interest paid on a home equity line of credit is deductible up to $100,000.
When you purchase a rental property, such as a vacation home, your home mortgage deduction depends on how often you stay in the home for personal use. If you occupied the property for 14 days or fewer throughout the year, you can deduct the mortgage interest and write off additional expenses like insurance, repairs, advertising, HOA dues, and supplies.
A side note: If you rented out your primary home or vacation property for 14 days or fewer throughout the year, you don’t have to declare the money you made as rental income. That’s a big benefit for people who live in neighborhoods subject to spikes in demand during certain times of the year.
What is a points or loan origination fee deduction?
Points or loan origination fees are deductible fees you paid to get your mortgage. If you purchased a new home for your primary residence, the points or loan origination fees can all be deducted this year. However, if you refinanced, the points paid need to be deducted over the life of the loan. For instance, if you take out a 10-year mortgage at the beginning of the year, you can deduct one-tenth of the points each year — equivalent to $1,000 a year for each $10,000 of points paid on the loan. The points you can deduct will also be reported on Form 1098 from your lender or your settlement statement.
However, if you refinanced and took out a larger loan than your first mortgage, any points paid on money used for substantial improvements on the home can be deducted immediately.
Can I deduct property taxes?
If you live in a state with high property taxes (we’re looking at………… New Jersey), you’re in a position to save big. You’ll find how much you paid on your Form 1098 if your property taxes were escrowed; if not, you’ll go by the amount you paid for the year indicated on your property tax bill. You can also deduct for any payments made through an escrow account at settlement or closing.
Do I qualify for energy tax credits?
If you made energy-efficient improvements to your home during the year, you may qualify for certain tax credits. Eligible upgrades include adding insulation, caulking windows, installing energy-efficient windows and doors, and replacing your furnace and water heater — up to a $500 credit.
An even bigger payoff: If you made improvements for geothermal heat pumps, small wind turbines, and solar energy systems, these count as additional credits (officially known as a residential energy efficient property credit) worth up to 30% of the cost of the items. Both principal residences and second homes qualify.
What about a moving expense deduction?
If you purchased a home because you took a new job, you may be able to deduct your moving expenses. To qualify, you’ll need to meet specific requirements: For example, your new workplace must be at least 50 miles farther from your old home than your old workplace was. Depending on the circumstances, you can deduct the cost of packing and shipping your possessions, traveling to your new home, storage of up to 30 days, and even the cost to move your pet.
What you can’t claim on your taxes?
Sorry to report, but there are some housing-related costs that don’t qualify for a credit or deduction. These include homeowners’ association dues or condominium fees, homeowners’ insurance, appraisal fees, utilities, or principal payments on your mortgage. In addition, most people mistakenly think they can deduct transfer tax on the purchase or sale of a residence. (Neither is deductible.)
This one is obvious, but you’ll want hard-copy proof of your earnings for the previous two tax years. When in doubt, just scan your whole tax return; some of us lenders prefer to have your entire return anyway.
Most of the time, your last two pay stubs will suffice, but I like to ask for up to 60 days worth of payment records. If you receive payments via direct deposit, printable versions of your paycheck might take some legwork to track down, so it’s best to get on top of this one early.
Are you getting an early inheritance from your parents to help cover your down payment? They’ll need to write a gift letter making clear that the money is indeed a gift and not a loan. The letter should be addressed to the mortgage company and include, among other elements, the dollar amount, the address of the property you hope to purchase, and the date the funds were transferred.
Credit card statements, student loan statements, car loan statements, child support agreements … you need records of them all. Honesty is key here; “forgetting” to include debts can put your loan approval and closing in jeopardy.
As a buyer, you’ll need to offer bank statements as part of your lender’s due diligence procedures. They’ll look to confirm that your money is “seasoned” (essentially confirming that any financial transfers were completed legally) as a requirement of the USA Patriot Act. Large deposits must be sourced and verified. Have pity on your loan officer, he/she didn’t make the rules, but has to follow them.
This one is less traumatizing. You’ll need to gather proof of any other assets, such as mutual fund statements and documents relating to any other real estate or property you own. Usually 2 months worth.
You’ll actually need this twice: once during the initial mortgage application process and once at closing. The seller also needs to bring a copy to the closing.
Once you start shopping around for a piece of real estate, you’ll want to prove your buying power. The preapproval letter details your loan type and amount you’ve been approved for, plus your interest rate. It’s like carrying around your buying résumé.
The P&S is a legally binding contract, not merely a pinkie-swear promise. As such, you should have your real estate attorney carefully review its terms before you sign it, then be sure to keep it handy as you begin the next stage of the buying process.
At closing, some lenders require proof of home insurance from the buyer, including hazard or flood insurance. Even after you secure the insurance itself, you’ll likely need printed copies of the policies.
Unloading a condo? At some point during the selling or refinancing process, potential buyers and the mortgage lender, will most likely want to peruse the rules of the condo association; if they’re savvy, they might also want to read the minutes of recent association meetings.
Property lines are often surprising; even if you’ve lived in a home for eons, you might be shocked to discover that a sliver of your driveway doesn’t technically belong to you. Before selling your place, you’ll want to pull up the survey document to assure the buyer that the presumed land is theirs. Lenders may also require that the buyer have a new survey done before the sale can close.
Here’s another one that can easily slip through the cracks, but as a seller, you’ll also need receipts for any property taxes paid in the last couple of weeks. This is a potential point of concern for some home sales, as sometimes the full property tax payments have not been made for the year by the time of the sale — leaving the buyer and seller to negotiate the details of the remaining payments. Currently owed condo or HOA fees are also frequently negotiated in the same way.
Monica G Ferreira
AMS Mortgage Services, Inc
T 908-425-5893
E monica.ferreira@mac.com
After living in a home for a number of years and likely outgrowing it (that’s why you’re moving, right?), it can be hard to market storage space if it’s something you see as a flaw. Just remember: Showcasing your home in the best light is not just about what you love about it.
First-time buyers are not simply comparing your home with other homes, they also are comparing it with the renter lifestyle and every bad rental property that inspired them to make the leap to being a homeowner. A common complaint from renters is that apartments lack storage, which can lead to a frustrating, cluttered life. The vision of having a place for storing everything is a big motivator for many first-time homebuyers. So if your home is tricked out with walk-in closets, pantries, or other built-in storage amenities that you plan to leave for the new owner, make sure your agent boasts about that in your home’s marketing materials.
In the same vein, if you’ve invested in upgrading your home with built-in closets, kitchen or garage renovations, or customized desks or bookshelves, make sure buyers know. All upgrades should be on your home’s online listing. From the first-timer craving a clutter-free existence to buyers who are moving up into a family home and want each family member’s space to have at least the possibility of order, built-in organizers can represent value and appeal to a wide range of prospective buyers.
You might be thinking the right buyers for your home will find it online because of where it’s located. Why bother calling out the property’s proximity to amenities and attractions?
Some buyers simply might not know to search for your ZIP code if it’s just outside the one they’re actively searching in. Or they might not be aware that your hidden gem of a neighborhood also happens to be tucked within a half-mile of a train station, entrances to three freeways, and two regional parks. Or buyers’ proximity wishes might be different from the location requirements of their search. They might be looking at all homes in your town that meet their price range, but the fact that yours is within walking distance to a major employer or university could push you to the top of the list. And relocating buyers might not have the core knowledge of the area to even begin to know what is around your neighborhood.
Never assume! If your home is well-located in a desirable neighborhood, vis-à-vis major employers, universities, recreational facilities, or walkable shopping and dining districts, talk with your agent to make sure you’re highlighting those amenities.
Boomers are not necessarily looking for homes with built-in disability features, but homes that allow “aging in place” and somewhere they could live comfortably for retirement and beyond. This means homes with level-in entrances (no steps to the front door), single-story layouts, and low-maintenance landscaping have a massive new audience. These features might otherwise not warrant a mention in a home’s marketing, but they should — especially if homes near yours tend to have loads of stairs or other features that are difficult for people to navigate as they age.
Similarly, the movement toward aging in place has seen many more families moving older relatives in with them versus moving them out to retirement homes. These extended families often are looking for homes with a well-appointed “mother-in-law” or “outlaw” unit, or a second master suite located on the home’s ground floor. Don’t overlook marketing your home’s multiple bedrooms with bathrooms en suite or completely independent living quarters.
Chances are, you won’t forget to mention if your home runs entirely off the grid or implements gray-water reuse and rainwater harvesting. But even buyers who aren’t hunting for a “green” home can be attracted to the budget-friendliness of energy-efficient features. So if your home is a pretty no-frills property but has a tankless water heater, dual-paned windows, and new insulation, mention it! If you’ve managed to get your energy bills down way below what’s normal in your area, this could be a selling point you don’t want to overlook.
If you’ve configured your home to encourage greener living — beyond lower energy bills — that could warrant a mention in your marketing. You might think things like your little organic kitchen garden, backyard compost bin, or that $50 recycling center you installed are so low in cash value that they don’t warrant a line in your house listing materials. But loads of buyers are attracted to these sorts of features, so why not call them out?
In a similar vein, if you have a hypoallergenic HVAC system or have used only nonchemical cleaning products for the last few years, you might want to mention these things as well. Marketers say today’s consumers are careful about not just what they put into their bodies, but also what they put on and around their bodies. If you’ve taken care to create a home that works well for people with physical or philosophical sensitivities to common household chemicals, make sure prospective buyers know that your house won’t make them sick!
When you’re buying a home, your home appraiser holds a surprising amount of power. If the house appraisal comes in less than the agreed-on price, you could be left to make up the difference out of pocket, since lenders approve loans based on the appraised value, not the contract price. It’s possible the sellers will drop the price of that Boston, MA, real estate to match the appraisal. After all, if the home appraised low once, it could very well appraise low again. But if the sellers won’t budge — maybe they have an all-cash backup offer in the wings — it could mean back to the drawing board for you. Be prepared; here’s what you need to know about all the ins and outs of the appraisal process.
1. Understand what you can’t do
Control freaks take note: Buyers can’t do much to affect an appraisal. “The appraisal process is completely hands off as far as the buyer is concerned” .“Appraisers have to follow strict guidelines prescribed by Fannie Mae and lenders” . “There is a database that all secondary market appraisals go into, called Collateral Underwriter, or CU, that runs the appraiser’s report against a huge database of past appraisals and market data to confirm the findings are accurate,” . It’s a very regimented process.
These guidelines benefit buyers: They help prevent appraisal fraud, such as lenders pressuring appraisers to inflate the home’s price so that a deal can be made. But some appraisers, to avoid being accused of this deceptive practice, appraise lower than they probably should. Ideally, homes should appraise at their true market value. But although you can’t influence the appraisal amount, you aren’t powerless.
2. Know the neighborhood comps
You can take the seller’s word that the house you want is worth what they say it is. But unless you’re paying cash and don’t mind throwing extra money around (lucky you!), it’s always good to know what similar homes in the area have recently sold for. Besides checking recent sales prices on Trulia, “Ask your broker to show how they arrived at valuing the house so you can justify your offer price”. If there are low comps in the area from short sales or foreclosures, for example, the appraisal could come in lower than your offer. Help guard against this by having your agent ask the lender to use a local appraiser who would be more likely to know the value of the home you want to buy. You can’t ask for a specific appraiser, just as you normally can’t request a certain teacher for your child. But you can request an “experienced” appraiser or a “local” appraiser.
3. Speak with the appraiser before the report is made
Why not request that your agent be on-site when the appraiser is there? “Your agent should provide printouts of recent sales (both on-market sales and off-market sales) that justify the purchase price”. If your agent can’t be there, at least have them communicate with the appraiser.
Communication is key. If the agent is aware of any concerning issues, [they can] provide information to the appraiser before the report is generated. Maybe the appraiser doesn’t know about the mold issue in the nearby home that just sold or the divorce that led to a quick sale, causing those comps to be lower.
4. Recognize the reasons for low appraisals
Use your knowledge of the area to inform the appraiser, who might not be aware of local factors as intimately as you are. Here are some issues that account for low appraisals, says Grabel:
Home prices in your area are increasing so quickly that the comps that sold six months ago don’t yet reflect this improvement.
There aren’t adequate comps in your area, so the appraiser used comps from a less desirable community.
The house you want has a much better view than the house that sold down the street, which overlooks power lines.
Your house has a beautifully finished basement with a bedroom and bathroom. (Appraisers are required to use a lower value per foot for space below grade.)
Your house has a pool or high-end landscaping, which didn’t lead to a higher appraisal.
5. Look over the appraisal report and ask about a revaluation if warranted
You have the right to see a copy of the appraisal report. Look it over as carefully as you look over your credit card statement each month. (You do that, right?) “If it has been found that errors or omissions exist within a report, it should be and will be corrected,” “And perhaps the result is in fact a higher value.”
If the house doesn’t appraise somewhere in the vicinity of the price you and the seller have agreed on — despite your efforts — you can ask for a revaluation. This tactic isn’t always easy to do and will cost you another appraisal fee. The exception is an FHA appraisal, used if you’re getting an FHA loan. “An FHA appraisal will follow that home for the subsequent four months and will not be able to be evaluated.”
The U.S. housing market is expanding. Fueled by low mortgage rates and the rising cost of rent, home sales are at decade-best levels and values have eclipsed last decade’s peak.
Plus, with an abundance of low- and no-downpayment mortgages; and the return of piggyback lending, there are fewer obstacles to homeownership for first-time and repeat buyers.
When you buy a home, though, you pay for more than just the house — there are closing costs to consider.
Closing costs are down 7 percent as compared to last year; but, costs can still be quite high — especially if you’re finding yourself tight on cash for a down payment.
The good news is that, as a home buyer, your contract can stipulate that the seller of the home pay for any and all closing costs such that your closing cost obligation drops to zero.
The arrangement is known as “Seller Concession” and it’s commonplace in today’s home purchase contracts.
Don’t want to pay closing costs? Ask the seller to pay them on your behalf.
When you purchase a home using a mortgage, your lender is required to disclose all fees which you’ll incur as part of the transaction. These fees are known as “closing costs”.
By definition, closing costs are costs paid by a home buyer. However, the term is used in more general terms to include all of the costs associated with buying a home.
This can include settlement costs such as title search fees, attorney costs, and flood certifications.
The blanket term “closing costs” can also include fees assessed by state and local governments including transfer stamps, and other local taxes.
Closing costs vary from loan-to-loan because many fees are based on the exact amount of money borrowed. The more you borrow, in general, the higher your costs.
According to Bankrate.com’s annual survey of closing costs, lender fees are down seven percent from last year, but still range between 1-6% of your overall purchase price.
However, in some states, such as New York, where attorneys’ fees can be expensive; and, in Chicago, where a 7.5 percent “real estate sales tax” exists, closing costs tend to outpace the 1-6% average nationwide.
As a buyer, finding money for a downpayment and for closing costs can make purchasing a home cost-prohibitive.
Thankfully, there’s a “clean” way to get your closing costs paid. The solution is called Seller Concessions, and lenders have special places in their guidelines to allow for it to happen.
Seller concessions is a formal arrangement by which a home seller agrees to pay some, or all, of a buyer’s closing costs at the time of settlement.
Sometimes, seller concessions are referred to Interested Party Contributions (IPC), and sometimes they’re referred to as Seller Contributions or a Seller Assist.
Each terms means the same thing — it’s a reference to when the buyer’s closing costs are paid by a party other than the buyer.
Such an arrangement is allowed on all major loan types, too, including conventional loans backed by Fannie Mae and Freddie Mac; FHA loans backed by the Federal Housing Administration; VA loans backed by the Department of Veterans Affairs; and, USDA loans backed the U.S. Department of Agriculture.
Here’s how seller concessions work.
First, a home buyer and home seller reach agreement on a sales price for a home. It could be any price, so long as there’s an agreement.
Then, the buyer and seller both agree to raise the sales price of home above its original level, with the seller agreeing to concede the entire “raised amount” toward the buyer’s closing costs at settlement.
Sometimes, seller concessions will cover all of a buyer’s cost. Other times, it will not. In no circumstance, however, may the amount of seller concessions exceed the amount of closing costs charged to the buyer.
The buyer cannot use seller concessions to get “cash back” at closing, or for any other purpose than to pay for closing costs shown on a settlement statement.
In addition, seller concession may not be used to compensate for home appliances or roofing in need of repairs; or, to make the buyer’s downpayment.
Seller concessions may only be used to offset buyer closing costs.
That said, limitations exist for seller concessions.
One, as discussed, is that seller concessions may not exceed the sum of a buyer’s closing costs. Another is that the home’s sales price must be supported by the home loan appraisal.
A buyer’s request for seller concessions will be rejected if the home’s appraised value is below the adjusted sales price.
Lastly, you can’t request unlimited seller concessions. Depending on the buyer’s loan type, seller concessions are capped to a specific percentage of the loan size.
A conventional loan, for example, will allow up to 6% seller concessions for loans with a loan-to-value (LTV) of 75% or less; 6% seller concessions for loans with LTVs between 75 and 90%; and, 3% seller concessions for loans with an LTV over 90%.
Investment properties are capped to 2% of the purchase price.
FHA loans allow up to six percent in interested party contributions; VA loans allow up to 4% in interested party contributions; and, USDA loans allow up to six percent.
Seller contributions are allowed on jumbo loans, too. Limitations vary by bank.
If you’re buying a home but don’t want to pay costs, Seller Concessions are a good way to reduce the amount you’ll need at your settlement. Once you’re under contract, your lender can help you plan for the steps.
Take a look at today’s real mortgage rates now. Your social security number is not required to get started, and all quotes come with instant access to your live credit scores.
If you’ve been on the fence about buying a home, 2016 is the year to take the plunge.
Mortgage rates have been bouncing around record lows for a while now. But even though they’re likely to start going up, you haven’t missed your chance to get a deal on a house.
A number of factors are coming together, making next year a good time to buy:
1. Home prices will finally calm down
Real estate values have been on the rise for a while, but are likely to slow their pace next year. Prices are expected to rise 3.5%, according to Zillow’s Chief Economist Svenja Gudell.
Buyers who’ve been stuck behind the wave of rising prices may finally get the chance to jump in.
And that could lead to a flood of buyers, said Jonathan Smoke, chief economist at Realtor.com.
“We have the potential for about six million home sales just through the months of April through September; that is basically impossible to do,” he said.
Related: These are the most expensive housing markets
But not everyone will be in a position to take advantage.
Despite the slowdown, Zillow still expects home values to outpace wage growth, which can make it tough to afford a home, especially for lower-income buyers.
Plus, prices in the country’s hottest markets — like San Francisco, Boston and New York City — aren’t expected to pull back as much next year.
2. More homes will hit the market
The slowdown in home prices will prompt more owners to list their homes, Smoke said, giving buyers more choice.
“Because of the price appreciation they have experienced, you will have more sellers put homes on the market next year,” he said.
Related: How to buy a home without a 20% down payment
The new home market is also expected to grow in the coming year with builders focusing more on starter and middle-range homes, which will also boost inventory and make it easier for buyers.
With more homes on the market, bidding wars will become less common and prices could ease even more.
3. Dirt cheap mortgages could disappear
The Federal Reserve is widely expected to begin increasing interest rates soon, which means the window for record low mortgage rates is closing.
While rates are expected to go up gradually, higher rates push up borrowing costs and monthly mortgage payments.
“You are likely to get the best rate you will possibly see, perhaps in your lifetimes through the majority of next year, but certainly, the earlier the better,” said Smoke.
4. Rents will still hurt
Rent prices are expected to continue to climb in the new year, which means in most cities, buying will be cheaper than renting.
Even though mortgages could get more expensive, buying might still be the better deal.
Interest rates would need to rise to around 6.5% for the cost of buying to equal that of renting on a national level, according to Ralph McLaughlin, housing economist at Trulia.
Monica G Ferreira
908-425-5893
Monica Gisela Ferreira 