This year has been huge for buyers, who have been able to take advantage of mortgage rates that have approached record lows for record lengths of time. But what about you? Have you been interested in getting into a new home, but haven’t jumped at the opportunity yet?
A popular theme when making huge financial decisions is to fear tomorrow. Will that home still be available tomorrow? Will you still be able to access such a great rate tomorrow?
Most assume that mortgage rates are only going to climb, compared to this year’s lows. But does that necessarily mean you need to buy in the last few months of 2016? We’re going to look beyond tomorrow, and into 2017 to give you a hint as to what you can expect, and make your home-buying decisions accordingly.
1) Yes, Rates Will Be Going Up
If you’ve kept up with the news, you know that a rise in rates is more “when” than “if.” The Federal Reserve Board had previously stated its intentions to raise the Federal rate several times during 2016, but balked. It’s possible this change could come as soon December.
So what does this mean for mortgage rates? Both Reuters and the mortgage Bankers Association have published their projected rates, and both foresee rises. Quarter 1 of 2017 will feature average 30-year mortgage rates at around 3.9 percent, and that will rise gradually to around 4.4 percent by Quarter 4.
Yes, that’s an increase, and 4.4 percent sounds terrible if you got used to 3.5 percent this Summer. But 4.4 is still a walk in the park compared to the 6.5 percent average of 2008, and don’t even get us started on the near-17 percent rates of the early ‘80s.
Mortgages will still be a realistic goal for buyers with good credit during 2017. And you know what? The MBA made the same “rise” predictions for 2016, and that didn’t happen. Maybe 2017 will be static as well.
02) Demand Will Stay High, Even With Higher Rates
We implied that the slight increase in rates wouldn’t break buyers’ backs, and other economic factors will continue to keep demand for homes high as well. There will be a surplus of jobs, which means wage-growth will offset any rise in mortgage rates. When wages rise, people are more willing to look for a home.
The MBA suggests that 2017 will feature an even more competitive buying market than 2016 was, even with the higher mortgage rates. The group predicts $1.1 trillion in mortgage originations during 2017, and a further $1.18 trillion during 2018.
If you want to buy a home during 2017, you may be in for some competition. Make sure to review good shopping strategy before you jump in.
03) Conforming Loan Limits for FHA, Fannie Mae, Freddie Mac May Rise
The good news for some, albeit a limited amount of buyers, is that the conforming loan limits for FHA, VA, Fannie Mae and Freddie Mac-backed mortgages may be rising to accommodate rising housing prices.
For example, in our home state of Florida, the limit for an FHA-backed, single-unit home is $417,000. Some areas of the state, such as Collier and Monroe Counties, feature higher limits in order to amend for the area’s high cost of living. Check out LoanLimits.org in order to see what the limit is for your county, no matter what state.
These limits can make a huge difference when planning just how much home you can afford. Applicants in Key Largo can qualify for $112,000 more than residents of Miami. Find out your conforming limit and use it as a cut-off point when operating with a realtor.
04) Act Now If You Can…But Don’t Jump The Gun
As we suggested, rates will almost certainly be higher during 2017. That being the case, if you’re ready to make a run at a home, it could benefit you to lock in the current rate.
However, as we also noted, next year’s projected rates will still be extremely generous in the grand scheme of things. You should in no way move faster than is responsible just to beat the rate shift. If you don’t have enough to cover closing costs or a healthy down payment on the home, or if you don’t have a significant “rainy day” fund to cover repairs and emergencies after the purchase, you shouldn’t be buying at all.
Getting a low rate is great…but not at the expense of your happiness down the line.