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What Is a Mortgage?
A mortgage is a loan used to buy a home. You agree to repay the loan in monthly installments over time—typically 15 to 30 years. Each payment includes the loan’s principal (amount borrowed) and interest (lender's fee for lending you money). Some payments also include homeowner’s insurance and property taxes.
What Does a Mortgage Really Cost?
Your monthly mortgage payment is more than just repaying the loan overtime. Here's what’s typically included:
Principal: The actual loan amount.
Interest: The cost of borrowing money.
Taxes: Local property taxes, often included in your payment.
Insurance: Homeowner’s insurance, and sometimes private mortgage insurance (PMI).
It’s important to factor in these costs when budgeting for your new home.
What Do You Need to Qualify?
To qualify for a mortgage, lenders look at a few factors:
Credit Score: A higher score can lead to better interest rates.
Income: Lenders want to see sufficient and stable income to cover payments.
Debt-to-Income Ratio (DTI): Your monthly debt payments compared to your income.
Down Payment: How much money you can put down upfront. While 20% is often cited, many programs allow for less.
How Much Down Payment Is Required?
The down payment depends on the loan type:
Conventional loans: Usually require 5–20%.
FHA loans: Require as little as 3.5%.
VA and USDA loans: Often require $0 down.
For buyers struggling to save, down payment assistance programs can help make homeownership more accessible.
Why Choosing the Right Loan Matters
Different loans fit different financial situations. A fixed-rate loan offers stable payments, while an adjustable-rate mortgage (ARM) might have lower initial rates. Government-backed loans (like FHA or VA) are great for lower down payments or unique financial needs. It’s all about what works for your budget and goals. It’s crucial to consult with a loan officer who can help identify the best loan option tailored to your financial situation.
Remember, that these minimum requirements apply to some of our loan options. There are many other alternatives and requirements available as well.
November Mortgage Rates
Mortgage rates saw a slight decline in the month of November. This was influenced by the Federal Reserve's monetary policies, including recent rate cuts aimed at stimulating economic activity. According to Bankrate, on November 28th, we ended the month with an average of 6.91% for a 30-year fixed, 6.18% for a 15-year fixed rate, and 6.68% for a 5/1 adjustable mortgage rate.
One thing to remember is individual rates will vary. Rates also depend on your credit score, loan amount and more. Make sure to stay on top of mortgage rates so you can get the best deal for your dream home!
What Does This Mean For You?
Here’s how the current rates impact each group:
Homebuyers:
Higher Monthly Payments: Elevated rates mean buyers face higher monthly mortgage payments. This can limit the size of the loan they qualify for.
Opportunities for Bargaining: In a slower market where fewer buyers can afford homes, buyers may find themselves with more negotiating power to ask for price reductions, closing cost assistance, etc.
Consideration of Adjustable-Rate Mortgages (ARMs): To reduce initial costs, some buyers might opt for ARMs, which typically offer lower rates initially but adjust over time.
Home Sellers:
Fewer Potential Buyers: Higher rates can shrink the group of qualified buyers, potentially leading to fewer offers and longer time on the market.
Price Adjustments: Sellers may need to adjust their asking price or offer incentives (e.g., covering closing costs) to attract buyers in a more cautious market.
Selling to Serious Buyers: While the buyer group may shrink, those still active in the market tend to be more serious and financially prepared, reducing the likelihood of deals falling through.
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