If you’re like me (a renter), you may keep asking yourself this one question, “Is now a good time to buy?” Both loan officers and Realtors hear this question very frequently.
Prospective homeowners wonder about the economy, higher prices, as well as their budget. For those committed to purchasing a home, first-time buyers or even repeat buyers, the time is right! Below are several reasons why you should feel confident about purchasing (or refinancing) a home now.
Improving Economy –
The overall U.S. economy is still in a recovery mode but there are continuing signs suggesting that it is conducive to home purchasing. A recent report from the Mortgage Bankers Association of America noted that the Federal Reserve’s December 15th decision to raise the short-term interest rate indicated confidence in the future growth of the economy. “The unemployment rate is at 5%, employment is growing, and core CPI inflation is running at 2%. By any measure, the economy is close to meeting the Fed’s targets, and it is time to raise rates above zero.”
In addition, The Index of Consumer Sentiment increased to 91.8 in December (preliminary reading) from 91.3 in November, according to a University of Michigan survey. Meaning, most people think the economy is doing better, and reported strength in their personal finances and buying.
Obviously, your own economic situation is the most important factor to consider. For example, being confident in your long-term employment status and the ability to meet regular financial obligations is paramount. Of course, you also know that purchasing a home—the biggest investment most people ever make—will be a major boost to your economic well-being. You’re not only buying a home, but investing in the future as well.
Reasonable Interest Rates –
Although the Federal Reserve did increase the interest rate, mortgage rates are still at historically low levels and should remain favorable for the near term.
It makes sense to monitor interest rates, but the key is to make your decision based on current conditions, not necessarily what might happen in a week, a month or a year. Even experienced forecasters have a difficult time predicting interest rate fluctuations.
Diverse Loan Programs –
One of the most compelling reasons to purchase is the diversity of available loan programs. Borrowers can have a loan tailored to their specific short- and long-term plans. In addition to a conforming loan (limits established by Fannie Mae or Freddie Mac) at a fixed or adjustable rate, there are various mortgage options. For example, the FHA’s government-insured loans have higher limits, low down payment requirements and more lenient credit score requirements. The FHA also offers the 203(k) program designed for those who want to purchase a home that needs repair or upgrading. It enables the borrower to obtain one mortgage loan to finance both the purchase and rehab of the home, rather than two separate loans.
In addition, eligible veterans can obtain a no down payment VA mortgage that doesn’t require mortgage insurance. The USDA offers a 100% mortgage program for rural properties.
There are specific loan programs designed for teachers, law enforcement personnel and other groups as well.
Also, down payment assistance programs have been developed for borrowers who need extra help upfront.
Borrower Friendly Environment –
A major overhaul of the financial industry regulations and other guidelines has resulted in greater protections and support for borrowers. Recently announced “Qualified” mortgages ensure that home loans don’t have excessive fees. There is a special focus on a borrower’s “ability to repay,” meaning that you must be able to comfortably make monthly and other payments. In addition, the new TILA RESPA Integrated Disclosure (TRID) rule was developed to “help the consumer understand the transaction by using readily understandable language to simplify the technical nature of the disclosures.” It includes new Loan Estimate and Loan Disclosure forms that will enable borrowers to clearly see the key features, risks and costs of a mortgage loan.
Stress-free Process –
You may have heard that obtaining a mortgage loan has become more complicated, making the process frustrating and extra time consuming. However, even though the underwriting guidelines have changed and more paperwork may be involved, most borrowers can anticipate a smooth transaction and timely closings. For example, OneTrust Home Loans’ customers are typically closing their loans within an average of 25 days.
New homeowners seem to be as enthusiastic about purchasing as repeat buyers. A National Association of Realtors survey noted that an “overwhelming majority” of current renters who are 34 years of age or younger want to own a home in the future (94 percent), and overall, 83 percent of polled renters have a desire to own.
Experienced loan officers know how important it is to ensure their customers fully understand the nuances of the loan process. They’ll give clear directions about the financial records and other documents required at application, spend sufficient time explaining any question areas, and provide regular updates throughout the transaction.
Purchasing a home is a major responsibility and definitely requires a commitment. However, as so many people have learned, the American Dream of homeownership is achievable and extremely rewarding.
Interested in learning more about the wide-world of home loans? Check out more of our blogs!