After the Federal Reserve raises its rate, interest rates on mortgages and home equity loans could rise. How will this affect home buyers and homeowners?
What The Federal Reserve Did, And Why
The Federal Reserve raised its bedrock interest rate. Mortgage interest rates are likely to rise, as well as home equity line of credit rates.
The Fed increased its target rate for federal funds by 0.25% or one quarter of a percentage point. The federal funds rate is not the only interest rate. Large banks often charge a prime rate on corporate loans. It will also rise by 0.25%.
As an inflation-fighting measure, the Fed is increasing its interest rates. The Fed will likely raise the federal funds rates multiple times this year, as inflation is significantly higher than the central bank’s target.
How the Fed Rate Hike Affects Home buyers
Because mortgage rates tend to move in the same way as the federal funds rate, they are likely to increase. Mortgage rates could trend up throughout the year due to anticipated increases.
You’re good if you have signed a contract to purchase a home and locked in an interest rate. Your rate cannot be increased by the lender.
However, if you are shopping for a home right now or have plans to do so in the future, your mortgage interest rate might be higher once you receive a purchase offer. A contract is required to purchase a home. You cannot lock the interest rate.
You may find yourself shopping at a lower price if mortgage rates increase significantly well before you purchase your dream home. Higher interest fees can reduce your purchasing power.
You shouldn’t rush to purchase a home just because the mortgage rates are increasing. You should seek the help of a professional real estate agent to help you out. The rates shouldn’t be the sole driving factor in deciding whether someone should purchase a home. Rates are a factor, but financial and personal factors are more important.
How Does The Fed Rate Rise Affect Mortgage Refinancers
As interest rates rise, fewer homeowners will be able to refinance to a lower rate to reduce their monthly payments.
Not everyone refinances to cut back the payments they make per month. Many go for cash-out refinances. They refinance much more than what they owe and then take the difference in cash. This cash can be used to pay for renovations, debt consolidation or tuition.
Interest rates that are higher can reduce the amount of cash-out refinancers could afford since higher interest rates lead to higher monthly payments.
The home equity line is another option to cash out refinances. However, HELOC rates are expected to increase. Fixed-rate home equity loans will likely experience the same fate.
How the Fed Rate Hike Affects Home Sellers
If you’re a home seller, you may be taking offers seriously if they come from home buyers with a preapproved mortgage. But in order to be more comfortable and confident in the ability of a buyer to afford the house you’re selling, you need to make sure that the preapproval is based on the existing interest rates.
Why? If you accept an offer from someone who is not qualified for a mortgage loan, you will lose valuable time.
You may sell your home to someone who belongs to a higher income bracket than the one you marketed your house to initially.
Many potential first-time homebuyers put off applying for a mortgage because they believe it is too complicated and time-consuming. Many new mortgage programs were made available in 2021 so that first-time home buyers could qualify for loans much more easily. FHA loans are an FHA loan is a popular option for first-time home buyers to purchase a home.
First Time Homebuyer Options
FHA loans are popular due to their low credit requirements and down payment requirements. FHA loans are available to borrowers with bad credit scores below 500. However, a 10% down payment is required in order to qualify. A borrower who has a FICO score below 580 will not be approved by a lender.
If your credit score is less than 580, it’s important to first improve it before applying for a mortgage. A 3.5% down payment is required for FHA-insured mortgage loans if your credit score is less than 580.
Request a Copy of Your Credit Reports
First, you need to get copies of your credit reports from all three major credit bureaus. You can also visit annualcreditreport.com, which is a government operated site, to get a free copy of your report. This can only be done once per year.
Also, you should know your credit score. Visit the sites that offer free reports and scores. Credit Karma and Credit Sesame are good places to start.
Check Your Report For Errors
Once you have all three reports, review them one by one to ensure that no errors are found. If you discover any, contact the credit bureau immediately to file a dispute.
What to Look For:
Phone numbers and addresses from the past and present
Incorrect account information
Accounts you don’t own
Late payments that shouldn’t be there
Credit Injuries Not Authorized
By contacting the credit bureau by phone or online, you can dispute incorrect information about your credit report.
Check your credit score
Your credit score is a key factor in securing mortgage approval. Before you apply for a mortgage, it is important to have a good credit score. Credit Karma, Credit Sesame and Credit Karma are two sites that will allow you to check your credit score free of charge.
Credit Scores can be improved
Resolve credit card balances. The amount of credit you have available is known as your credit utilization ratio. This is responsible for 30% your FICO score. You should pay off your balances in a amount that is less than 15% of the credit card limit.
Do not apply for new credit. A hard credit inquiry will be done on you once you apply for credit. This could lower your credit score. You may also be adding debts to your credit report which could negatively impact your credit score.
You must pay your bills on time – it is important to keep up with your payments. You must make timely payments if you plan to apply for a mortgage. It may be beneficial to set up auto-pay for your bills payments.
Be Preapproved Before you Go House Hunting
You must first get preapproved for mortgage financing before you begin your home hunting. A loan officer will assess your credit and verify your income, assets, and bank statements.
Most realtors will not show you houses until you have a preapproval letter. Most sellers won’t accept offers without the preapproval letters. It is easy to get a preapproval. In just minutes, you can get a preapproval. Important documents such as 2 years worth of tax returns, 2-3 month bank statements, proof that you have paid down, W2’s, and pay stubs should be brought.
Find out if you are eligible for an FHA loan
FHA loans are more flexible and suitable for first-time home buyers looking for a loan they can qualify for. FHA mortgages have a maximum loan-to-value ratio of 96.5%. This means that you only need to make a 3.5% down payment.
FHA Loan Benefits
Minimum credit score 580
3.5% down payment
A down payment can be made as a gift
Programs for down payment assistance are available in many places
Low interest rates
Accepts higher ratios of income to debt
Available in fixed rate and adjustable terms
Decide your down payment options
The type of mortgage you receive will determine how much you’ll need to put down for your down payment.
Low or no down payment home loans are very popular for first-time home buyers who typically have less cash reserves. FHA loans only require 3.5% of the purchase price for down payments, which makes them a great option for first-time home buyers.
If you do not have 20% down payment, you can get mortgage insurance by taking out a conventional mortgage. Below are some down payment requirements for each type of home loan.
FHA Loans: 3.5% with a 580 credit rating
VA Loans – No Down Payment Required
USDA Loans – No Down Payment Required
203k loans – 3.5%
Conventional loans – 5% to 20%
Conventional97 – 3%
Hire A Reputable Real Estate Agent
A few home-buyers aren’t hiring a real estate agent when they first buy a house. Do not be one of these people. Remember that the buyer pays the realtor and that the cost of the house is already covered by the agent. A reputable and experienced realtor can help you navigate the home-buying process as well as negotiate a fair price. You can trust that he or she will look out for your best interests.
Budget for All Homeownership Costs
Apart from the mortgage, there are many costs involved in getting a mortgage. There are closing costs, mortgage insurance, homeowners insurance and HOA fees.
FHA loans require MIP (mortgage insurance) regardless of how much you have paid down.
Based on the amount of the loan and the down payment, the MIP for FHA loans can range from 0.80% to 1.1%.
If you have less than 20% down payment, a conventional loan is the best option. You don’t need private mortgage insurance, but MIP is required if you make at least 20%.
Calculate your debt to income ratio
The ratio of your monthly income to debt, or DTI, is the difference between your monthly income and your monthly debt payments. This includes things such as car loans and credit card payments.
The front-end DTI ratio, which is the ratio between your income and debt payments, excludes the mortgage loan, is the front-end DTI ratio. If you earn $5,000 per month and your monthly total payments are $1,000, your front-end DTI ratio would be 20%. Maximum front-end DTI ratio of 28%
The back-end DTI ratio (or income to debt payments) is your monthly income divided by your mortgage payment. If you have a pretax income of $5,000, and your monthly mortgage and debt payments total $2,000, your back-end ratio would be 40%. Maximum is 41% In some cases, however, the ratio may reach as high as 50%.
Look for Grants and Programs Available to First-Time Home Buyers
First-time homebuyers can take advantage of a variety of down payment assistance programs and grants. HUD offers several state programs to help first-time home buyers with the down payment.
Local programs can also be found on the websites of your localities. Some of these programs may require you to attend a homebuyer education class in order to be eligible.
The U.S. Department of Housing and Urban Development created the Good Neighbor Next Door Program (GNND) to help law enforcement, teachers, and emergency personnel become homeowners. They provide them with 50% of the list price of HUD homes found at hudhomestore.com
HUD offers the One Dollar Program, which allows local governments to purchase HUD homes at $25,000 and below. These homes must have been on sale for at most 180 days. In an effort to revitalize their community, these houses may be offered to low-income families.
Learn What Loans are Available for First-Time Home Buyers
There are many loan options available for first time home buyers, including the FHA loan. Based on your situation, there may be other loan programs available that offer advantages over FHA home loans.
Conventional loan – If you have at least 20% down payment, then you should consider applying for a conventional mortgage. FHA requires mortgage insurance regardless how much you have down. You will not need to carry PMI if you have 20% down. This will save you thousands each year.
Conventional 97 loan – Fannie Mae created this type of loan to rival FHA loans’ low down payments. You can qualify for conventional 97 programs with a 3% downpayment and a 680 credit score.
VA Loan – If you are a veteran, you may be eligible for a VA loan. This mortgage option is the most straightforward. It doesn’t require mortgage insurance nor a down payment.
USDA Loan – This program was established by the US Department of Agriculture in order to help low-income homeowners in rural areas save money on their mortgages. You may be eligible if you live in an area that is eligible for a USDA Loan. The mortgage rate is only 0.35% and there is no down payment.
A 203 Loan – If you’re looking to purchase a fixer-upper, a renovation FHA loan (also known as a 203k Loan) may be available. A loan can be obtained to purchase a house that needs repairs.
Fannie Mae Freddie 3% down loan – Fannie Mae Freddie Mac are the largest buyers of mortgage loans. The conventional 97 mortgages were also launched by Fannie Mae and Freddie Mac. It is a 3% down payment program that allows them to compete with FHA loans.
FHA Energy Efficient mortgage or EEM – This helps borrowers finance the purchase of a home and gives them extra money to make energy efficient improvements.
Additional Important Information
Who are First-Time Home Buyers?
To be eligible for first-time home buyers, you must not have owned a home in the last 3 years.
Are You a Requirement for a Down Payment?
Some programs do not require a down payment, such as USDA or VA loans. Existing homeowners can also apply for them. A down payment is not required for any type of loan.
Which loan is best for you?
When it comes to home loans, first-time homebuyers have different requirements. One type of loan might be right for you, but it may not work for you.
FHA loans are the most preferred home loan for first-time homebuyers. FHA loans have lower down payments and stricter qualification requirements.
What credit score is required to be eligible for an FHA loan?
Federal Housing Administration requires that borrowers have a minimum credit score of 500 and a 10% downpayment. A borrower with a better credit score than 500, or at least 580, will be able to get the loan insured for 3.5% less.
The Key Takeaways
It doesn’t have to be scary to buy a house for your first time. Follow the above tips and work with a trusted Myrtle Beach loan officer and real estate agent to ensure that the entire process runs smoothly.
If you require professional help in purchasing a home, call Full Potential Real Estate, LLC
Full Potential Real Estate, LLC
Myrtle Beach, SC 29577
I recently helped a couple buy their first house. The problem was that the agent representing them also represented their seller, which led to distrust and mistrust throughout the entire transaction. It is not a good idea to have one agent representing both buyers and sellers.
Although the couple closed on the house, their friendship with the agent, a close friend, was destroyed. The couple stated that their main source of tension in the case – which was a novice home buyer – was whether the agent was looking out for our best interests or the sellers. “My partner and I never were 100% certain,” they later added.
Retained a Myrtle Beach buyer’s agent to represent you
Many property buyers have used a Realtor for years to help them find available properties, make offers and negotiate a deal. Myrtle Beach Real Estate Agents make money by collecting fees from the seller so they clearly have an interest in selling a property. They are less likely to highlight potential flaws in a property or the location. According to the Federal Trade Commission, 72% of property buyers believed that the agent who showed them the house represented them. But that was not always the case.
A number of states have passed laws that require agents to disclose the duties of their representatives in real-estate transactions. This includes if they are a dual agent (i.e. The buyer and seller. House buyers began to use “buyers agents” more often, a real estate sales representative that represents only the buyer.
According to the National Association of Realtors (a Washington, D.C.-based trade organization for the market), 46% of home buyers had signed contracts with buyer’s representatives by 2001.
Property Buyer’s Agent Council, a division within the NAR, is based in Chicago. It notes that there are more than 33,000 agents serving all 50 states.
Promoting for the Buyer
Myrtle Beach Buyer’s Agents can be licensed as real-estate agents. They work exclusively for the buyer, which is a significant difference between them and a seller’s representative. A purchaser’s agent may negotiate with the seller for lower closing costs, negotiate a lower price or help negotiate a smaller deposit. A purchaser’s representative can help them find a real estate lawyer to review the sales contracts. They can also assist buyers in locating inspectors to inspect the house being bought.
Cheryl Woodward is a Full Potential Real Estate broker who tries to help home buyers in the same way that a business consultant would aid a company. Ms. Woodward says that buyers can decide whether or not they like the house. They need someone to support them in making a sound corporate decision.
Ms. Woodward has a good knowledge of the local area and is able to discuss these with potential buyers. Ms. Woodward can also provide access to databases that reveal the insurance history and history of the area. Megan’s Law regional versions may reveal whether there are any sexual transgressors in the area.
She says, “That’s definitely something somebody with a loved one would like to learn about.” “A seller’s agent is not required to tell you about these matters. They wouldn’t want to you finding out about those things.
Multiple-listing allows buyers’ representatives to view listings that include houses that have been marketed by other real-estate agents. They can also reveal homes listed as “for purchase by owner” or “for sale through a builder” if they represent the buyer.
How they are paid
A commission is usually paid at the time the offer closes. This payment is typically taken from the profit of the offer. The buyer’s representative may also work on an hourly basis or retainer, similar to an expert or attorney. However, it is important to remember that hourly costs can quickly add up.
A buyer’s agent is naturally interested in a sale closing when they are paid a commission. This is a common practice in the market. Michael Golieb, a Florida real estate broker, states that the primary motivation of a buyer’s agent is to get you to purchase something.
You can reduce the chances of conflicts by not using a buyer’s representative who works for the same company that the representatives who are listing the properties you want to see. This is known as “dual agency”.
Who pays the Commission?
A buyer’s representative may show a potential buyer a home for sale by owner (FSBO) to raise concerns. “It is common for the seller to say, “OK. “I’ll pay the commission. The seller will often say “No.” Elisa Galati is vice president of GoneHome Inc., an internet real-estate listing service. She says, “I won’t pay the Commission, you’ll have to pay it,”.”
Representatives find FSBOs scary because of the complexity of the real-estate transaction. Any number of things could go wrong, postponing the sale,” Mark Hayden, a director for communications at eRealty.com. Hayden is an online house seller. Most of the time the FSBO owner will be unrealistic about the house’s price and not aware of the fees and documents required to expedite the closing. Sometimes the seller will seek counsel from the buyer’s rep, which can lead to a conflict of interest scenario for the buyer’s agent, states Mr. Hayden.
Working with a Buyer’s Agent
Prospective home buyers should interview several agents before signing a contract. They also need to compare their recommendations with previous customers. It is also a good idea to contact your state’s real estate regulatory agency to see if there have been any complaints about your options.
The terms of an agreement must be written by home purchasers. This agreement will include the representative’s fees, rates, and other costs. It is called a buyer’s agency agreement.
To schedule an appointment with Full Potential Real Estate, LLC, call us today.
Full Potential Real Estate, LLC
Myrtle Beach, SC 29577
A home purchase can be a thrilling, stressful, and nerve-wracking experience, especially for first-time home buyers. It will be difficult to know what to expect. It can be difficult to grasp the basics of real-estate. But, the majority of your primary concerns can be addressed with basic financial research.
Tips To Help You Have A Stress-Free Home Buying Experience
What Can You Borrow and How Much Can you Spend?
An affordability calculator will help you determine how much of a house you can afford. The calculator takes into account your income and debt in order to determine your spending limit.
Get a credit report and know your credit score.
Use the mortgage calculator to calculate your monthly payments. The mortgage calculator allows you to input various numbers such as the purchase price, interest rate, or loan amount. This will give you a better idea of what you should expect in terms of expenses before you make any purchase.
Look For A Mortgage Lender
Find the best rates and terms
Talk to brokers and lenders to determine the best mortgage type for you.
Ask for a quote on closing costs. This includes attorney fees and taxes.
Pre-approval is required for any home loan. This will give you a clear understanding of your loan limit and make you appear serious to the seller.
Make a Must-Have List
Find the best location. You can choose between rural, suburban or city life.
Select the price range that allows you to live comfortably while still paying your monthly bills.
Find out how many bedrooms and bathrooms you need, as well as the general dimensions of your dream home that will accommodate you and your family.
You should distinguish between must-haves and things you want. To avoid any potential problems down the line, you will need to classify the features of your dream house by their importance.
Choose Your Target Neighborhoods
You can find information on market trends, schools and amenities in the neighborhood like cafes, grocery stores, parks, etc., on the listing pages.
You can find information on crime rates in the areas you are interested by looking online.
You can choose the streets you want to live in. You may find that a city or town does not meet your needs. Remember that every neighborhood is different.
Consider the recommendations and reviews of the agents you are considering hiring.
Search For Your Dream House
With the assistance of your agent, go to open houses and search online for listings.
Ask your agent to arrange private tours for potential homes. This will allow you to inspect the property, take measurements, and assess its features.
It can be difficult to recall all of the details you see in the homes you visit. Make sure you take down your notes and use your cell phone to take pictures.
Ask for details about the properties you are considering. You may reach out to Full Potential Real Estate, LLCfor all the relevant real estate services you need.
After narrowing down your search to your favorites, ask for a list comps to determine the fair market value for each property on your final list.
Find out why the seller put the property on the market. This will help you to plan your negotiation strategy. The seller may be more willing and able to negotiate the asking prices if he/she is in a hurry.
Consider the extra costs associated with buying and owning. Request copies of any bills, such as property taxes, HOA fee fees and utility bills, to help you budget.
Make an offer
Make sure you offer the fair market value when you have finally found the house you want to purchase. Your agent can help you negotiate and agree on the final price.
Before you sign the Purchase and Sell Agreement, be sure to include any personal repairs requests as well as the date of your move-in.
Do not forget a Home Inspection and Appraisal. Ask your Myrtle Beach real estate agent to recommend a reliable and certified home inspector. To ensure that nothing is overlooked, refer to the home inspection checklist. It’s better to be safe than sorry.
You can also have the property appraised by professionals and then use the results to negotiate the purchase price, if necessary.
Close the Deal
After you have finished the loan process, make sure everything is in order for closing costs and down payment.
You should order a final title search and the property title transfer from the seller during the closing day.
Once you have purchased your dream home, you need to prepare for moving in.
If you need assistance finding the perfect home, please call Full Potential Real Estate, LLC. You may reach us at (843) 492-4537.