Financing
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30 Year Fixed Mortgage Rates Dropped Half Percentage Over Past Two Months |
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![]() Mortgage interest rates have, indeed, steadily declined over the past two months -- from 4.94% down to 4.45%. That is a half of a percentage point, which is a large decline given the range of mortgage rates we're seeing today. So -- now we're back to where we were for much of 2018 -- or at least April through September. Today's buyers will luck out with a low housing payment compared to what they would have expected two months ago -- IF (this is a big if) they can actually find something to buy in this low inventory environment. Where do rates go from here? It's anyone's guess. This recent drop gives me hope that we could spend all of 2019 under 5%. We shall see! | |
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Some Perspective on Changes in Mortgage Interest Rates |
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![]() In some ways, my alarm bells are going off!
But yet -- it looks like the average rate for 2018 will only be 0.54% higher than in 2017 -- and the graph above puts that in what might be a somewhat more helpful context. The last red bar (all the way to the right) is an indication of how much the annual average rate will have increased between 2017 and 2018. Any red bar is an increase in the average annual rate. Any blue bar is a decrease in the average annual rate. As such -- the increases we have seen in 2017 and in 2018 are a far cry from the crazy increases seen in 1978, 1979, 1980 and 1981. And there have been several times in the past thirty years when there has been a year or two of increases of less than 1% in a year, that were then followed by decreases in subsequent years. So -- back to real rates -- you could get a mortgage with a rate less than 4% a year ago, and now it would be just under 5%. And it's possible that the rates will keep rising in 2019. But in the big picture:
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The Impact Of Higher Mortgage Interest Rates |
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![]() One year ago, the average 30-year fixed mortgage interest rate was 3.94%. Today, that same average rate is 4.81%. Does this rise in mortgage interest rates impact buyers? It sure does! A buyer purchasing a $200K home would pay $82/month more for their mortgage payment -- with the increased interest rate causing it to increase from $942/month to $1,024/month. A buyer purchasing a $300K home would pay $123/month more for their mortgage payment -- with the increased interest rate causing it to increase from $1,413/month to $1,536/month. A buyer purchasing a $400K home would pay $164/month more for their mortgage payment -- with the increased interest rate causing it to increase from $1,884/month to $2,048/month. Of note -- the estimated mortgage payments above include principal, interest, taxes and insurance -- and assume that the buyer is financing 80% of the purchase price. So.....
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Mortgage Interest Rates At Highest Point in Eight Years |
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![]() Mortgage interest rates keep on rising. The current average rate for a 30 year mortgage is 4.81%. These two statement are equally true... 1. Current mortgage interest rates are now higher than they have been for the past eight years. 2. Current mortgage interest rates have been higher than the current rate for 38 out of the past 46 years. The lingering question over the past few years has been whether rising interest rates, which pushes monthly housing costs higher, will eventually slow down buyer ability and buyer interest. We don't seem to be seeing that as a current widespread effect, but the more the rates increase the more likely that becomes. | |
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30 Year Fixed Mortgage Interest Rates Keep Rising |
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![]() Mortgage interest rates keep on rising. The question now seems to be whether the higher rates will take anyone out of the market to buy -- or will put a damper on rising home values / sales prices. Thus far, buyer activity has continued to be quite strong in 2018 despite these modest increases in interest rates. Interest rates have not quite risen a full percentage point over the past year.... 3.85% back in October 2017 4.71% today | |
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30 Year Fixed Rate Mortgage Interest Rates Seeming Stable Around (Just Above) 4.5% |
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![]() Despite the fact that interest rates have climbed almost three quarters of a percentage in the past year -- they are now seeming relatively stable, around 4.5%. Over the past three months we have seen interest rates mostly between 4.5% and 4.6%. These interest rates, being higher than the sub-4% rates seen last year, do not seem to be hindering buyer interest and activity -- as we have seen a record year of home sales (thus far) in 2018. If you will be buying a home soon, I would recommend talking to a lender early in the process to get a sense of your buying power and to understand your potential monthly mortgage payments. | |
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When To Get Serious About A Mortgage For Your Home Purchase |
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![]() Here are the three sequences I see buyers follow most frequently....
As Late As Possible
Incredibly Proactive
A Reasonable Middle Ground
I try to encourage all of my clients to at least be in the "reasonable middle ground" sequence as outlined above. This gives them a firm idea of what they can afford and how a home price will compare to a loan payment. This also allows them to make a stronger offer, already having a pre-qualification letter in hand. I strongly discourage my clients from following the "as late as possible" sequence as outlined above. This doesn't help them make the best decisions about which houses to pursue, how far to negotiate, etc. This also doesn't allow us to make as strong of an offer on a house. Occasionally, one of my clients will fall into the "incredible proactive" sequence as outlined above, and wow, this makes the financing process a joy to work through! These buyers have already done so much of their work with the lender before even thinking about which house to buy -- which then allows them to focus on buying, negotiating, inspecting, etc., rather than be bogged down in the process of securing their mortgage. Let me know if you have questions about how I have described these sequences -- and let me know if you would like a few recommendations for lenders in the Harrisonburg area. | |
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Mortgage Interest Rates Edge Back Down, A Bit |
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![]() Mortgage interest rates have steadily climbed over the past nine months -- from 3.78% last September to 4.66% about two weeks ago. Now, however, they have drifted back down a bit to 4.56%. Will this be a trend? Are we headed back below 4.5%? Not necessarily. But -- it might be an indication that we're not going to keep on rolling all the way up to 5% anytime soon. If you are buying a home and are under contract to buyer a particular property and have not yet locked in your mortgage interest rate, this week would seem to be a particularly good time to do so. Explore historical interest rates here. | |
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Why Is Shopping Around For Mortgage Interest Rates Important? |
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![]() As mortgage interest rates rise, we are likely to see a bit more variation in interest rates between lenders. As such, it is important to check with at least two lenders to make sure you are getting the best possible interest rate on your new mortgage. As shown above, a half of a percentage point shift in the interest rate can make a big difference in the monthly payment. Oh, and if we stretch out that difference over 10 years, assuming you stay in your home that long, here's how much extra you would pay with that higher mortgage interest rate....
Feel free to email me (scott@HarrisonburgHousingToday.com) if you would like recommendations of lenders in this area. | |
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14% Increase in Home Buyers Signing Contracts in January and February |
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![]() Mortgage interest rates are edging up again, as you may have heard. The average 30 year fixed rate at the end of February was 4.4% -- up from 3.9% just three months prior. Could this (slight) rise in the cost of financing your home be affecting the pace at which buyers are signing contracts? Possibly. It seems that 14% more buyers signed contracts this January and February as compared to last year during the same timeframe. This is a likely indicator that we'll see stronger months of closed sales in March and April. Then, the questions will be....
Let's hope for yes and no, in that order. | |
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30 Year Mortgage Interest Rates Starting To Rise |
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![]() While we ended the year just below 4%, the average 30-year fixed mortgage interest rate has now risen to 4.15%. This is a good bit above the 12-month average of 3.98%, though still historically low in any longer term context. It seems possible that we'll see some further increases in coming months, though I don't think rates will get up to 4.5% in 2018. And....it's possible they will drop back down closer to 4% within the next few weeks or months. | |
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Average 30 Year Mortgage Interest Rates Still Below Four Percent |
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![]() Mortgage interest rates are still below 4% -- after having spent November 2016 through May 2017 between 4% and 4.5%. Today's buyers are enjoying the opportunity to lock in their monthly housing costs at historically low rates. And -- let's look a bit further back -- at the past three years.... ![]() As you can see, above, mortgage interest rates have fluctuated between 3.5% (+/-) and 4.25% (+/-) over the past three years. If you were prequalified for a loan nine months ago (when rates were at 4.3%) you might want to request some updated potential payment scenarios from your lender with the current mortgage rates. | |
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A Ruff Breakdown of Why Millennials Are Buying Homes |
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![]() I'll say no real surprises here, on this analysis put together by SunTrust Mortgage of why millennials are buying homes....
Knowing why you are buying a home, and how long you think you will be in that home, are important things to be thinking about as you are preparing to embark upon the home buying process. Thanks to JoDee Lambert at SunTrust Mortgage for this fun infographic. | |
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Sellers Paying More and More of Buyer Closing Costs |
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![]() Nearly half of sellers (46.6%) pay some portion of a buyer's closing costs in the form of a credit at closing. Over the past five years, the number of sellers providing a "concession" of this sort to buyers have stayed between 40% and 50%. ![]() Here's the interesting one -- sellers have paid more and more of a buyer's closing costs over time. The average amount of seller concessions has increased steadily over the past five years. But why, you might ask? It's hard to say exactly -- buyers might be asking for more money, sellers might be agreeing to provide a larger credit, or perhaps the total amount of closing costs that a buyer has to pay is increasing as well? ![]() If, as a seller, you are paying part of a buyer's closing costs, you are most likely to be paying between $4K and $6K --- or between $2K and $4K. And again, as a seller, if you pay part of the buyer's closing costs -- you are not alone -- 45% or so of sellers do so! | |
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Should you buy or rent a townhouse in Harrisonburg? |
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![]() Given continued low interest rates and some increase in home values, let's take a new look at the opportunities of buying versus renting. RENT = $1050/m. There are regularly options for renting a two-story townhouse in Harrisonburg for approximately $1050 / month in Avalon Woods, Beacon Hill, Stonewall Heights, Liberty Square, etc. BUY = $1012/m. With a 95% loan, buying such a townhouse apparently may cost as little as $1,012 per month assuming a $155K purchase price and a 4% interest rate per SunTrust Mortgage's payment calculator.... ![]() This shows a rather small, $38/month, cost savings of buying instead of renting. If we then look at the difference between renting and buying over a five year time period, the advantages start to pile up. ![]() As you can see, this builds a rather compelling case for buying instead of renting if you are going to be living in this potential townhouse for the next five years. Two other factors to keep in mind....
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Fear Not, Mortgage Interest Rates Sticking Close to Four Percent |
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![]() Another month -- and still no meaningful changes in the 30 year mortgage interest rate. Since the beginning of the year, these rates have slowly edged downward, and have now been below four percent for most of the past three months. This continues to provide a great opportunity for home buyers -- likely spurring on continued buyer interest in our local market. As I commented to someone last week, I have been thinking mortgage interest rates were going to start increasing for at least five years now -- and I have been wrong for at least five years now. Will they ever increase? Possibly. When? How? By how much? It's anyone's guess at this point. I think there is probably a 75% chance (maybe a 90% chance?) we'll finish out this year at or below 4.5% -- which is hard to believe. | |
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30 Year Mortgage Interest Rates Comfortably Below Four Percent |
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![]() Anyone who thought mortgage interest rates were above 4% for good -- and perhaps climbing up to 4.5% or 5% -- seems to have been WRONG! I certainly thought we were headed for 4.5% or 5% -- but over the past three months, 30 year mortgage interest rates have continued to slowly decline to their current level of 3.88%. Yet again, a great opportunity to lock in your monthly housing costs over the long term at one of the lowest possible monthly cost per dollar spent, given these tremendously low mortgage interest rates! | |
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When to start working on securing your mortgage financing |
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![]() Here are the three sequences I see buyers follow most frequently.... As Late As Possible
Incredibly Proactive
A Reasonable Middle Ground
I try to encourage all of my clients to at least be in the "reasonable middle ground" sequence as outlined above. This gives them a firm idea of what they can afford and how a home price will compare to a loan payment. This also allows them to make a stronger offer, already having a pre-qualification letter in hand. I strongly discourage my clients from following the "as late as possible" sequence as outlined above. This doesn't help them make the best decisions about which houses to pursue, how far to negotiate, etc. This also doesn't allow us to make as strong of an offer on a house. Occasionally, one of my clients will fall into the "incredible proactive" sequence as outlined above, and wow, this makes the financing process a joy to work through! These buyers have already done so much of their work with the lender before even thinking about which house to buy -- which then allows them to focus on buying, negotiating, inspecting, etc., rather than be bogged down in the process of securing their mortgage. Let me know if you have questions about how I have described these sequences -- and let me know if you would like a few recommendations for lenders in the Harrisonburg area. | |
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Mortgage Interest Rates Stay Reasonable at 4 Percent |
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![]() OK, so, admittedly, mortgage interest rates were compellingly low last year -- at around 3.5% for much of the year. However, at their current levels of 4%, that is still very (VERY) low historically speaking. Buyers still have a great opportunity to lock in their monthly housing costs for the long term at what will likely be some of the lowest interest rates we see over the next few (several? many?) years! If you're looking for a qualified, professional, responsive local lender, let me know. | |
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Lock Your Mortgage Interest Rate NOW |
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![]() What??? Average mortgage interest rates (on a 30 year fixed rate mortgage) are back below 4% again. I truly did not think we'd see that this year -- or possibly ever. It seemed likely we'd stay between 4% and 4.5% or even up to 5% during 2017. Anyhow -- if you're in the market to buy, and have a contract signed on a house you are purchasing -- LOCK IN YOUR INTEREST RATE! Of note -- if you can swing it to finance your mortgage over 15 years instead of over 30 years, you'll be even happier at 3.23%! | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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