Interest rates hovered around 4% for the majority of 2017, which gave many buyers relief from rising home prices and helped with affordability. In the first quarter of 2018, rates have increased from 3.95% up to 4.45% and experts predict that rates will increase even more by the end of the year.
Let’s take a look at a historical view of interest rates over the last 45 years.
Be thankful that you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.
• Historically, the choice between renting or buying a home has been a tough decision.
• Looking at the percentage of income needed to rent a median-priced home today (28.9%) vs. the percentage needed to buy a median-priced home (15.7%), the choice becomes obvious.
• Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!
By Holly Amaya | Jan 10, 2018
It’s been nearly a decade since the Great Recession delivered the worst housing crash in modern memory. But these days, the fallout feels squarely in the rearview mirror. Markets have bounced back with fervor, and confidence is skyrocketing: From Charlotte, NC, to Stockton, CA—and everywhere in between—homes are flying off the market at record prices, and buyers are still clamoring to get in the game.
One thing is clear: It’s a great time to be a seller.
“We’ve seen two or three years of what could be considered unsustainable levels of price appreciation, as well as an inventory shortage that resulted in a record low number of homes for sale across the country,” says Javier Vivas, director of economic research for realtor.com®.
Sounds like the stuff of seller’s dreams, right? But know this: If you plan to sell in 2018—and you want to unload your home quickly and for maximum money—your window of opportunity may be rapidly narrowing. Here’s why you should get moving ASAP.
1. Rates are still historically low, drawing buyers into the market
2. Inventory remains tight—and demand high
3. Home prices are still increasing
4. People have more money in their pocket
5. Millennials are ready to commit
You need a Real Estate Guru – allow me to assist.
| Buying a home can be intimidating if you are not familiar with the terms used during the process. To start you on your path with confidence, we have compiled a list of some of the most common terms used when buying a home. Freddie Mac has compiled a more exhaustive glossary of terms in their “My Home” section of their website. Annual Percentage Rate (APR) – This is a broader measure of your cost for borrowing money. The APR includes the interest rate, points, broker fees and certain other credit charges a borrower is required to pay. Because these costs are rolled in, the APR is usually higher than your interest rate. Appraisal – A professional analysis used to estimate the value of the property. This includes examples of sales of similar properties. This is a necessary step in getting your financing secured as it validates the home’s worth to you and your lender. Closing Costs – The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed and other costs. Ask your lender for a complete list of closing cost items. Credit Score – A number ranging from 350-800, that is based on an analysis of your credit history. Your credit score plays a significant role when securing a mortgage as it helps lenders determine the likelihood that you’ll repay future debts. The higher your score, the better, but many buyers believe they need at least a 780 score to qualify when, in actuality, over 55% of approved loans had a score below 750. Discount Points – A point equals 1% of your loan (1 point on a $200,000 loan = $2,000). You can pay points to buy down your mortgage interest rate. It’s essentially an upfront interest payment to lock in a lower rate for your mortgage. Down Payment – This is a portion of the cost of your home that you pay upfront to secure the purchase of the property. Down payments are typically 3 to 20% of the purchase price of the home. There are zero-down programs available through VA loans for Veterans, as well as USDA loans for rural areas of the country. Eighty percent of first-time buyers put less than 20% down last month. Escrow – The holding of money or documents by a neutral third party before closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance. Fixed-Rate Mortgages – A mortgage with an interest rate that does not change for the entire term of the loan. Fixed-rate mortgages are typically 15 or 30 years. Home Inspection – A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation. Mortgage Rate – The interest rate you pay to borrow money to buy your house. The lower the rate, the better. Interest rates for a 30-year fixed rate mortgage have hovered between 4 and 4.25% for most of 2017. Pre-Approval Letter – A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer. Having a pre-approval letter in hand while shopping for homes can help you move faster, and with greater confidence, in competitive markets. Primary Mortgage Insurance (PMI) – If you make a down payment lower than 20% on your conventional loan, your lender will require PMI, typically at a rate of .51%. PMI serves as an added insurance policy that protects the lender if you are unable to pay your mortgage and can be cancelled from your payment once you reach 20% equity in your home. For more information on how PMI can impact your monthly housing cost, click here. Real Estate Professional – An individual who provides services in buying and selling homes. Real estate professionals are there to help you through the confusing paperwork, to help you find your dream home, to negotiate any of the details that come up, and to help make sure that you know exactly what’s going on in the housing market. Real estate professionals can refer you to local lenders or mortgage brokers along with other specialists that you will need throughout the home-buying process.
The best way to ensure that your home-buying process is a confident one is to find a real estate professional who will guide you through every aspect of the transaction with ‘the heart of a teacher,’ and who puts your family’s needs first.
For clients who’ve closed on a home and want to make energy-efficient updates — or clients looking to make similar upgrades prior to selling — a home equity line of credit could be a great option to help pay for a wide range of home improvements.
Energy-efficient upgrades in particular are a great way to both add value and reduce expenses in the long term. Installing insulated windows or updating heating and air conditioning systems are relatively simple projects that can help clients lower their utility costs — but clients may also want to consider integrating these smaller updates into larger upgrades like a kitchen or bathroom remodel. Of course, these projects can get expensive, which is why a home equity line of credit (HELOC) could be a good resource for your clients. In fact, home improvements and remodeling have traditionally been among the most common reasons homeowners take out a HELOC.
There are a number of benefits to using a HELOC to pay for planned upgrades:
- Flexibility. Once someone opens a HELOC, they may draw out funds as needed up to a predetermined credit limit.
- Convenience. Most financial institutions provide checks that can be used to pay directly from the client’s HELOC for services used (for example, a contractor) and purchases made (for materials, appliances, etc.). Or, they can use secure online banking to transfer funds from a HELOC to their checking account to pay for home improvements.
- Low interest rates. Typically, the interest rates on a HELOC are much lower than on most credit cards.
- Possible tax advantages. Tell clients to check with their financial advisor to learn more about what kinds of tax advantages they may qualify for with a HELOC.
The Bank of America Real Estate Center can help clients figure out how much they may be able to borrow for a HELOC. Once they go to the site and type in their home’s street address, they’ll instantly see an estimated range of what their home is worth. Generally, they’re allowed to borrow a portion of their home’s equity (defined as the appraised home value less what is owed).
The three months through January had the fewest homes on the market on record, according to an analysis by Trulia. Prices jumped 6.9 percent in January from a year earlier, the biggest increase for any month since May 2014, data from CoreLogic Inc. show. And homes sold faster in the first two months of 2017 — spending an average 58 days on the market — than at the start of any year since at least 2010, according to brokerage Redfin.