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As residential financing rates climb, proper planning critical for affordable homeownership

Posted on Monday, February 3, 2014 at 10:23:34 AM

Homebuilder confidence in new single-family homes is on the rise, according to the National Association of Home Builders/Wells Fargo Housing Market Index. That level of optimism is expected to continue into 2014 as well. Higher mortgage rates haven't scared off potential buyers, either, as rates still hover near historic lows.

This means that now could be a good time for potential homebuyers to consider affordable residential financing. However, as vice president of Home Loan Investment Bank Patrick Deady explained, these appear to be moving upward. Therefore, a comprehensive plan and some quick action could help some people end up with their dream homes.

"Current mortgage rates remain low but they are definitely trending higher," he said. "Prospective homebuyers should look and buy now if they plan to make a new home purchase before rates rise too high. Consult a mortgage professional to determine the price of homes you qualify for, and have another consultation before making an offer on any home."

Given the number of factors that dictate reasonable residential financing rates and property prices, some buyers may not fully understand how much they should truly spend. Thankfully, there are several factors that can clarify that issue. 

"Your interest rate and real estate taxes are two variables that can have a significant impact on how much of a home you can afford," Deady added. "For example, a rate increase of half a point will result in a payment increase of $60 on a $200,000 loan. A full point increase will raise your payment $120, which can be enough to disapprove a loan."

There also appears to be a larger amount of buyers entering the market, something that will only multiply as the weather warms up. With added buyer activity, it is important for home shoppers to be smart in order to successfully navigate the housing segment.

"A prospective buyer's best friend in a competitive housing market is a good transaction team," he concluded. "You need a skilled mortgage banker, Realtor, and closing agent. Try to find a mortgage professional that has a team in place get your edge on the real estate market."