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Mortgage Market Guide

Home-Buying Success Strategies

Whether you are planning on purchasing your first home or looking to buy another, knowing where the market is trending in current times lets you make smarter decisions when buying a home. In this blog, we’ll discuss key factors about the housing market to help make your home-buying experience a pleasant one.

In 2023, mortgage interest rates rose to roughly 8% on 30-year fixed mortgages, which was the highest it had been in 20 years, according to CBS News. Mortgage rates went up mainly due to the federal government’s efforts to fight inflation through increases in interest rates.

Today, the government has gotten a handle on inflation and is talking about plans to lower rates. If this happens, it will likely result in lower mortgage rates. Keep an eye out for this change because it will help you determine the right time to buy a home.

Current Trends in 2024

In the fourth quarter of 2023, rates on 30-year fixed mortgages averaged 6.5%, which was 1.5 points lower than October 2023. According to Business Insider, Fannie Mae’s Economic & Strategic Research Group predicts 30-year mortgage rates will fall to 5.8% by the end of 2024. Although rates aren’t expected to drop back to 2021 levels when 30-year mortgages were at 2.65%, there’s a good chance they won’t be as high as they were in early 2023, says CNN.

Get Ready with Mortgage Pre-Qualification

While you wait to buy a home, be sure you’ll be able to qualify for a loan when the time comes. Getting pre-qualified with your preferred lender helps you create a game plan for buying a home by identifying how much home you can afford.

The first step is to review your credit to determine your credit score and clear up any discrepancies on your credit report. Remember, the higher your credit score, the better the rate you’ll be offered by lenders, which saves you money on your mortgage, according to Forbes.

Also, determine your debt-to-income ratio by comparing your monthly income to your monthly debt payments to be sure you can handle adding a mortgage payment. You should also have adequate savings on hand for the costs that are associated with buying a home.

What Mortgages Are Available to Buyers?

Selecting the right loan product can ensure you are getting a mortgage that fits your needs. There are several lending options available and the best way to determine the right one will be to consider several factors. For example, there are fixed-rate mortgage options that let you pay back the home loan over a set amount of time without fear that your interest rate will rise. A 30-year fixed mortgage is a great example and fits someone who plans to live in their home for a long period of time.

Alternatively, an adjustable rate mortgage (ARM) is for those who intend to live in their homes for a short period, such as five years. ARMs start off with a fixed interest rate for a short period and then the rate becomes variable for the rest of the term. An ARM would fit a buyer who is looking to stay in the home for a few years and then upgrade to a new home.

How the Economy Affects Mortgages

The main reason for today’s high interest rates was the Federal Reserve (Fed) increasing the federal funds rate to decrease inflation. As inflation stabilizes today, the need for rate increases is no longer a priority. If the Fed lowers rates, this will lower mortgage interest rates, which could create a higher demand for home purchases, according to CNN.

The housing market is greatly affected by interest rates and home supplies. When interest rates are higher, the demand for home ownership drops because of how expensive it is to borrow money. When the interest rates are low, the demand for homes increases. With more potential buyers, homes subsequently receive multiple bids, which tends to cause home prices to go up. Knowing how interest rates work can help you determine the best time to buy.

Strategies for First-Time Buyers

Purchasing your first home can be intimidating if you don’t do your homework. The first step is to review your current financial situation to realistically see how much home you can afford. Also, ensuring you have a good or great credit score is essential to obtaining the lowest interest rates from lenders, according to Forbes.

There are programs available to help first-time homebuyers with down payments. These include grants, savings programs, forgivable second mortgages, deferred payment mortgages and low-interest second mortgages, explains Forbes. When you’re ready, consult with a trusted lender such as Travis Credit Union to give you insights on what may be available to you.

The Market for Repeat Buyers

If you’re a current homeowner with a high interest rate, refinancing your home loan to a lower rate will let you save money. Another option with refinancing is to take out cash for whatever you may need. For example, you can use a cash-out refinance to fund home improvement projects, consolidate debt or pay for other major expenses.

If your current mortgage interest rate is lower than the current market rate, there are lending options that you could use which don’t require refinancing. For example, a home equity line of credit (HELOC) and a home equity loan are smart ways for homeowners to tap into their equity at a lower cost, without the need to refinance.

How TCU Can Help

Travis Credit Union offers a variety of home loans and home equity products designed to fit your needs. We can also help you plan better. Visit our Mortgage Hub to learn more. Use our free home loan calculators to determine your mortgage payment. We also have free webinars on buying a home. Start your home-buying journey with Travis today!

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