In economic crisis mortgage interest rates have reached all time lows. Consequently that would make this perfect time to buy, right? Of course, any applicant with flawless credit and a 20% down payment could definitely benefit from these rates which, by the way, have started rising again. In an October 6th article on CNN Money reported the Freddie Mac announcement of a 3.94% 30 year fixed rate mortgage while the current average rate BankRate.com has been showing the rate increasing again. Even still these rates today beat the subprime market of about 10 years ago.
Homebuyers eager to purchase their dream home can become slightly disheartened when they see how low the mortgage could be compared to what they qualify for. Howard Hanna, an Ohio real estate broker, shows mortgage payment details with every listing that is searched on their site and a local loan officer to contact for assistance. Once again the payment shown is based on the lowest rate available for pristine credit with a 20% down payment.
The item of significance here is that the average homebuyer still needs to know how to navigate the Cleveland market. At first glance a payment of $805.76 with an interest rate of 4.448% on a 30 year mortgage for a $200,000 home may give the impression that someone with a $30,000 income could afford a house of this magnitude.
However the down payment available, taxes and insurance play a big part in how much a homebuyer can afford. Discouraged homebuyers sometimes turn to foreclosed homes to find a good deal on a home they can afford. Sarver Realty, a local real estate agency, focuses on bank owned, probate and distressed homes and offers properties across the Cuyahoga County area. But sometimes finding a good deal still means having finances for repairs in certain cases.
A homeowner must know the seemingly mystical, secret criteria to qualifying and affording a home that is acceptable to the buyer. To take advantage of these low rates here are some nuggets of knowledge for any prospective homebuyer:
The down payment is important when buying a home. Do not just look at the down payment as a mortgage requirement but an opportunity to be able to afford more of a house and getting a better interest rate. So try and save more than just the normal 3.5% of the purchase price and shoot for 5%, 10% or more.
Getting a credit tune up can be vital to some homebuyers. It is good for homebuyers to know what is in their credit file before looking for a house or getting to the bank. It does not have to take long to address credit issues or even add trade lines that may be needed to qualify for a mortgage. A homeowner can see what is in their file for free annually or get a score for free at Transunion or one of the other credit bureaus.
Homebuyers generally know what area they would prefer to live in. Checking the tax rate for the area and knowing other options that offer similar amenities, home styles and even school districts can increase a homebuyer’s options if high taxes prohibit a buyer from buying in a preferred area.
Homeowners insurance and private mortgage insurance are also influenced by value of the home and area as well. These also effect the monthly obligation of a homebuyer.
Income, of course, plays a big part on what a homebuyer can afford. Homebuyers need to be realistic in how much of their monthly income can go towards housing expenses. The average borrower should try to keep the housing expense as close to 35% of their regular gross monthly income.
Sometimes certain debt may need to be paid off to make a home more affordable. Homebuyers may have to consider paying off installment loans that affect monthly expenses in order to qualify for a mortgage loan.
The more of the factors a homebuyer considers can position them to get a better interest than they normally may have qualified for. It may seem a little overwhelming but when a homebuyer knows the basics of their own situation this can make the process a little less alarming.