Over the past few years, real estate professionals likely noticed a strange trend among would-be homebuyers. When mortgage rates went up even slightly from near-historic lows, shoppers tended to retreat from the market despite the fact that affordability was still well below pre-recession and all-time norms. But now that rates and prices alike are creeping back toward the highs seen prior to the economic downturn, experts say the time to buy is now.
There are actually two things to consider when it comes to mortgage costs, because while prices in some areas may have now surpassed all-time highs, rates haven’t come close to doing so. As such, while some consumers may get a little worried about mortgage rates that have jumped nearly a full percentage point in the course of just a few months, it’s important to put that increase into context, according to MarketWatch. While today’s rates are in the low 4 percent range and expected to rise at least a little more over the course of 2017, they’re still well below those in the 5.5 to 6 percent range that were so common before the housing market crashed.
Simply put, mortgage rates below 5 percent were quite literally unheard of for recent generations of homebuyers. Not since the early 1970s have they been that low, and in fact got nearly as high as 20 percent in the early 1980s. As recently as the start of the 2000s, mortgage rates were closer to 7 percent. As such, today’s rates should still be seen as eminently affordable, and not something that should scare off shoppers any time soon.
With that having been said, though, experts also caution that the best time to buy will be in the near future. Prices and rates alike are expected to keep rising, so those waiting for a better deal than the ones available today to come along will likely find themselves disappointed. In general, experts advise that those who wait even six months to get into the market might end up paying tens of thousands of dollars more over the lives of their loans than current shoppers.
Other options to boost affordability
Fortunately, for consumers with the ability to make larger payments when they close their home loan agreements, there are other options for saving money on a mortgage, according to CNBC. Many lenders offer the ability to “buy points” at closing, which effectively means paying an additional 1 percent of the loan’s value to lower the interest rate by a single percentage point. The larger the payment at that time (which can obviously get expensive for those buying more than one point) the lower the ongoing interest rate. This can lower monthly mortgage payments a little bit each month, making it slightly easier to afford the mortgage in the long term.
With all this in mind, those who are now looking at their options in order to buy a home should talk to their agents and mortgage lenders about what their options for saving money might be. The ability to increase mortgage affordability is one that can really pay off over the course of a few decades.
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