Thursday, July 21, 2022 / by Ana Baldner
With the average listing price in Brevard County hovering around $494,000, many homeowners are feeling the squeeze that comes with rising mortgage rates. CNBC News reported that the rate for a 30-year fixed mortgage is at 5.65%. This a huge increase compared to the 3.29% rate we saw at the start of 2022. As these rates increase, so does the cost of buying a home with a mortgage.
At the current rate, the cost of a 30-year fixed mortgage on a $494,000 home would mean around $2,151 in monthly payments, if you put down 20%.
In better news, the constraints that limited supply has caused are slowly lifting as more homes are entering the market. We are seeing some softening in the buyer's experience of the market.
Here are some things to consider about your mortgage if you're looking to purchase a home:
Your Overall Budget
You should be comfortable with your monthly budget. Take everything into account when determining it. Generally, the rule is you should spend 30% of your income on housing costs. This amount includes mortgage payment, property taxes, homeowners insurance and maintenance.
This exact number can fluctuate depending on your situation. Student debt or having children in your household may mean that you aim for less than the suggested percentage. But if you don't have children living with you or are debt free, maybe you are willing to allocate a bit more towards your housing payments.
Whatever you decide, make sure it's a monthly payment that you are comfortable with and fits your situation.
Do Research Into Available Interest Rates
Don't settle for the first option that comes your way. This goes for mortgage lenders, real estate agents and homes! Do research on different lenders to find one you can trust. Compare different rates you find to determine the best option for you.
Since interest rates depend on your credit score, you'll want yours to be over 740 in order to land a desirable rate. Try to pull this score up and pay off as much debt as you can prior to applying.
Consider The Different Factors of Your Mortgage
There are different ways to bring your monthly bill down. One way is to make a large down payment, so you won't be borrowing as much money. A higher down payment will also give you a bigger choice of mortgages available. This could be possible for those who are selling a home at the same time, but for first-time home buyers, this most likely isn't as feasible.
Putting out more money ahead of buying can be seen as “mortgage points”. Mortgage points are the fees a borrower pays a mortgage lender in order to trim the interest rate on the loan. Typically each point costs 1% of the mortgage amount and will lower your interest rate by around 0.25%. Sometimes this option can make it expensive just to bring down your rate a little bit, other times you can get a lot of points without too much payment. Do some digging and figure out what rate you can get.
Another option you may go for is to focus on lowering the cost of the home as a whole. Opting for a 15-year fixed mortgage instead of a 30-year loan would mean higher monthly payments, but you'll be saving yourself from paying 15 years of interest.
Don’t Make Any Major Financial Changes Until Everything is Finalized
This tip may seem obvious, but it is extremely important and shouldn’t be overlooked. When getting approved for a mortgage, lenders will ask for many examples of expenses, statements and other forms that show your spending trends. It's important to avoid major purchases before you are approved and have your home, as it will show up to the lender and affect their trust in your ability to make monthly payments. Try to also avoid buying your new furniture for the home until you have the keys to your house in your hand.
The rising mortgage rates can make it tough on your homebuying budget, but that doesn’t mean it’s impossible to buy. It may just take a little strategizing. A trusted real estate professional can help you figure out your options and start the journey of getting you that dream home.
Florida Lifestyle Realty