The housing market has seen its share of fluctuations over the past few years. At the end of 2021, mortgage rates were so low houses could barely stay on the market. Properties were getting bought up well above the asking price as people were looking to take advantage of minimal interest.
But once 2022 arrived, all that began changing. Inflation caused the Federal Reserve to increase mortgage rates and many people got wet feet on moving forward with their buying transactions. Others were priced out of the market altogether.
Now that 2023 is closing in, people are wondering if this is their year to buy a home. After hitting an all-time high in November, interest rates dropped dramatically, making for the most significant drop in 14 years. So, will rates continue to drop, or will they go back up?
This is a question that needs to be considered by people thinking of starting or continuing their homeownership journey.
Will Rates Continue to Decline?
Experts are saying yes. Inflation is going down and interest rates are expected to follow suit. It is predicted that buyers will soon see rates close to 5%.
However, borrowing costs will remain on the rise for the foreseeable future to beat inflation.
Extra Incentive to First-Time Buyers
First-time buyers face extra financial challenges when buying a home. They don’t have the funds from selling their old homes to put toward their new homes.
Fortunately, Freddie Mac and Fannie Mae are coming to the rescue with mortgage rate discounts for low and moderate-income first-time buyers who purchase a primary home and finance it with a conventional fixed-rate or adjustable-rate mortgage.
Eligible buyers may get discounts as large as 1.75% off interest rates. Every one-point drop adds 11% to your purchasing range.
The program, called the FHFA First-Time Home Buyer Mortgage Rate Discount, is only temporary. Buyers are advised to take advantage of it while it’s still available.
Changes in Home inventory
When mortgage rates were low, home inventory went down as well. This caused buyers to enter bidding wars as they fought over the few homes available. Many ended up paying well above the market value.
Once interest rates went up, inventory increased. It has risen steadily over the past 3 months. However, once interest rates drop, inventory could decline again. This makes now the perfect time to strike.
Helping Buyers Afford Down Payments
For some buyers, it doesn’t matter whether rates are low or high. It’s affording a down payment that’s getting in the way of their home ownership dreams.
Well, there’s good luck for these prospective buyers as well. The government has made several down payment assistance programs available that allow buyers to buy a home with little or no money down. In fact, there are currently seven low-down payment mortgage programs to choose from.
The government is also helping by making these programs easier to qualify for. They are lowering credit score minimums by as much as 40 points.
Congress is also doing its part. They are working on passing nine home ownership and affordable housing bills that will help first-time buyers through tax credits, cash grants, and other incentives.
Is Now a Good Time to Buy a Home?
The decrease in housing rates is a good sign for home buyers. But buying a home is a personal decision that depends on various factors that may go beyond finances. And you can never be sure what the future will bring.
In any event, if you are wondering if you’re financially ready to buy a home, you may want to consult a mortgage calculator. This will estimate your monthly housing costs based on your down payment and interest rates. Once you crunch some numbers, you will be able to determine if you can take on the financial burden.
In general, if you find a home you love that works with your budget, you may just want to swoop it up. On the other hand, if the buying process comes with too many sacrifices, you may end up with buyer’s remorse. It may not be the right time for you to purchase, or you may be better off with another property.
Now that you have all the factors in front of you, will you be moving forward with your decision to buy?