Over the past few years, we’ve seen the real estate market exhibit a few changes, one of which being the decline in interest rates. While we witnessed a low of 3.3 percent interest for a 30-year mortgage last year in 2012, the percentage has since increased by more than a point – recently reported to be at 4.35 percent. Now regardless of whether you’re looking to buy, sell or refinance, it’s important to prepare yourself for how to adjust to these recent changes.
CNN Money provides us with a list of 5 things we should know about these increased interest rates when looking to delve into the real estate market this year:
1. Rates aren’t as low as they were, but they’re still cheap – As our economy continues to improve, interest rates are only going to increase. The Federal Home Loan Mortgage Corporation, better known as Freddie Mac, is said to expect 30-year mortgages to reach 4.7 percent by the end of next year, 2014. However, according to HIS Global Insight, rates aren’t expected to reach 6 percent until 2017.
2. The refinancing window is starting to close – Those who believe they don’t have enough equity to qualify for refinancing are encouraged to check again. Rising prices have pushed 850,000 homes into the black for the first quarter alone and the recovery has led an increased number of lenders to loosen up. According to the National Association of Realtors, the average credit score for an approved mortgage is up from the normal 720 to the current 761.
3. Higher rates won’t destroy the housing recovery – It’s a healthier economy that is boosting prices in the first place, Rates would have to rise severely to really make a mark. According to HIS U.S. economist, Patrick Newport, this turnaround will only dampen the pace of growth, at worst.
4. When you’re ready to buy, lock in – Most lenders won’t charge you for a 45-60 day rate lock. Typically you’ll find that the cost falls to around a quarter of a point per 30 days, and with a float-down option, you’ll pay less when rates fall to that point.
5. Fixed loans usually beat adjustables – This is considered to be a better option only if you are planning to own your home for a short period of time. If you are looking to stay at this new home for about five or six years, you’ll likely save with an adjustable, but it’s extremely important that you get a loan that matches your time frame.
These five points will help when it comes to knowing the right questions to ask when the time comes to make some serious decisions. Your real estate Broker and lender can both help you to understand what options are best for you and your family.