The new year looks like it’s shaping up to provide first-time buyers with the opportunity to enter into the housing market. Interest rates are still hovering around record lows, so there’s some time left to snag a great deal. If you’re planning on taking the plunge into homeownership in 2016, here are some key points to keep in the back of your mind before you begin the process.
1. Home Prices Are Expected to Even Out
Home prices have been on a steady upward climb over the past few years. But they’re on track to level off in 2016. That’s both good news and bad news for buyers, depending on what your financial situation looks like.
Home values are projected to increase by just 2.6% over the next year, according to Zillow. While that represents a slowdown from last year, values are still rising at a faster pace than wages. That means some lower income buyers may be shut out of the market if they can’taffordto take on a mortgage.
2. Mortgage Rates May Go Up
A rise in the federal funds rate was seen as inevitable and the Federal Reserve finally moved forward with arate hike at the end of 2015. For buyers, that move may signal the end of historically low mortgage rates, but it’s not a reason to panic. It’s likely that interest rates will climb up slightly but for the majority of buyers, it’s not likely to be an obstacle to home affordability. Again, the buyers who stand to be affected the most
3. FHA Loans Will Be Cheaper
FHA loans are a popular choice among first-time homebuyers because they make it possible to get a mortgage with as little as 3.5% down and a minimum credit score of 580. The only catch is that buyers who go this route are stuck paying an annual mortgage insurance premium (and an upfront mortgage insurance premium) on top of their regular loan payment.
The good news for 2016 is that the cost of the premiums are coming down. Last year, the Federal Housing Administration made a move to reduce the annual premium rate from 1.35% to 0.85%. For buyers who have their eye on an FHA loan, that represents a pretty substantial amount of savings when calculating theirmortgage costs.
4. But Getting an FHA Loan May Be More Difficult
The FHA Handbook for 2015-16introduced some new guidelines for lenders that may affect which buyers qualify for a loan. Some of the things covered in the updated rules include new documentation rules for gifted down payments and changes to the treatment of student loans when calculating debt-to-income ratios. Borrowers who have a high debt-to-income ratio and authorized users who are carrying credit card debt may find getting approved for a loan more challenging.
5. Buying Will Be Better Than Renting in Some Cities
The rental market has exploded in the last few years and rental rates have reached astronomical highs. That upward trend is expected to continue into 2016, and according to RealtyTrac, owning a home will be more affordable than renting in 58% of all U.S. housing markets. A spike in rental rates may push more buyers into the market, leading to increased competition over available homes.
Author:Marilyn Cortez Phone: 956-587-1633 Dated: February 9th 2016 Views: 357 About Marilyn: Always ahead of the highly competitive RGV real estate market, Marilyn Cortez is a Spanish speaking ...
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Always ahead of the highly competitive RGV real estate market, Marilyn Cortez is a Spanish speaking native of the Rio Grande Valley. Born and raised in Mission, Marilyn is committed to her clients, and is recognized as a Top Agent in the Greater McAllen Real Estate area, and within Keller Williams Realty. Since the start of her Real Estate career in 2007, she has sold over 40 million dollars of real estate. Known by her fellow real estate agents to be hardworking, honest, dedicated and motivated, Marilyn is knowledgeable in all areas of Real Estate and has built her business on results, with more than 70% of her clients being repeat clients.