Uncommon Knowledge
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Still, mortgage professionals on the ground continue to note an elevated pace of application and homebuying activity with borrowers seemingly accustomed to the high-rate environment of recent times. Mortgage rates in the US have risen for the fourth consecutive week, reaching an average of 7.17% for 30-year fixed loans.https://t.co/7m4K777J6b — Mortgage Professional America Magazine (@MPAMagazineUS) … [Read more…]
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Mortgage Bankers Association vice president and deputy chief economist Joel Kan said the report indicated “a little less strength than expected,” and said the slowdown would likely ease upward pressure on service sector inflation. Payroll employment increases by 175,000 in April; unemployment rate changes little at 3.9% https://t.co/ZwrVfLviqL #JobsReport #BLSdata — BLS-Labor Statistics (@BLS_gov) May 3, 2024 … [Read more…]
There haven’t been many appealing options for borrowers in the last two years.
With inflation problematic, interest rates were elevated to help rein it in. And while that caused inflation to drop from a decades-high in June 2022, interest rates have been stuck at their highest level in 23 years. On Wednesday, the Federal Reserve elected to maintain that level, keeping the benchmark interest rate range unchanged between 5.25% and 5.50%. This has resulted in higher borrowing costs for everything from mortgages and auto loans to personal loans and credit cards.
One alternative that has remained cost-effective, however, has been home equity. By tapping into their equity via a home equity loan or home equity line of credit (HELOC), homeowners have gained access to large sums of money, often at much lower interest rates compared to the alternatives. But an even lower interest rate is always preferable, leading some to wonder if home equity loan rates will drop further this month. Below, we’ll break down what to expect now.
See what home equity loan rate you could secure online today.
While the Federal Reserve kept interest rates unchanged this week, the implication that higher rates may be staying high for longer was clear. Even absent a formal increase in rates, rates on borrowing products like home equity loans and HELOCs may rise slightly if lenders believe that a rate hike is imminent.
So not only is it unlikely for home equity loan rates to fall in May — they may actually rise. That possibility could become more pronounced if the next inflation report, scheduled to be released on May 15, shows inflation rising yet again. If that happens, an interest rate hike becomes more likely — and rates on home equity products could rise.
Against this backdrop, then, homeowners may want to be proactive. Home equity loan rates are fixed (unlike HELOCs, which are variable). So by pursuing a home equity loan today, owners can lock in today’s low rate before it potentially rises further. And, if rates somehow drop in the months to come, owners could refinance their loan then. What they shouldn’t do, however, is rate for a better rate climate. Instead, get started now and lock in the lowest rate you can find.
Explore your home equity loan options here to learn more.
A lower interest rate isn’t the only selling point for home equity loans now. Here are two other reasons why you may want to pursue this option today:
Home equity loan rates are unlikely to fall in May and they could even rise as the month goes on. But because of that likelihood, and because of the low rate borrowers can secure now, it may be beneficial to act promptly. Combined with beneficial features like access to large sums of money and potential tax deductions for qualifying uses, a home equity loan can be your go-to credit option now. As with all financial products, however, be sure to weigh the pros and cons of this unique loan, as you could risk losing your home in the process if you can’t pay back what you borrow.
Source: cbsnews.com
The merged entity plans to operate under a Texas state charter, transitioning FirstSun’s subsidiary, Sunflower Bank, from a national bank to a state-chartered bank, which will also seek membership in the Federal Reserve System. As part of the merger, FirstSun will issue $48.5 million in subordinated debt, with proceeds enhancing Sunflower Bank’s capital. Concurrently, HomeStreet … [Read more…]
Housing experts say mortgage rates are likely to hover in the 7 percent range in May, amid elevated inflation that is keeping the Federal Reserve from reducing borrowing costs.
The high cost of home loans may keep buyers at bay as they await the decline of rates before they can make the leap toward homeownership.
Read more: Find the Lowest Rates From Top Mortgage Lenders
The Federal Reserve raised interest rates starting in March 2022 to its current two-decade high of 5.25 to 5.5 percent, a move geared to fight soaring inflation. This contributed to the push-up of borrowing costs, including for home loans. Inflation is still struggling to cool down to the 2 percent central bank target, which has forced policymakers to retain the high interest rate environment.
The 30-year fixed rate, for the week ending April 19, rose for the third week in a row to 7.24 percent—the highest level since November 2023.
Economic data, particularly around inflation, have come in higher than expected over the last few weeks. In March, inflation jumped to 3.5 percent on a yearly basis, up from 3.2 percent the prior month.
Unless inflation surprises in the coming weeks, mortgage rates are likely to stay in the 7 to 7.5 percent range, according to Realtor.com’s chief economist Danielle Hale. Fed policymakers are set to conclude their latest meeting on May 1, and they are unlikely to change their current stance on rates.
“Of all the data, I think that the inflation, specifically the [Consumer Price Index] out May 15, will have the biggest impact,” Hale told Newsweek. “Inflation and labor market data has come in higher and hotter than expected. This change in the data, which is driving a change in the outlook, has pushed interest rates, including mortgage rates, higher across the board.”
Read more: How to Get a Mortgage
High mortgage rates will depress buyers’ ability to buy homes.
“I expect homebuyers to approach the housing market more tepidly, and sales will reflect that trend,” Hale told Newsweek.
Orphe Divounguy, a senior economist at Zillow Home Loans, echoed Hale’s perspective on what will drive mortgage rates as inflation remains elevated.
“The fact that government borrowing remains high relative to demand for U.S. Treasury bonds is likely to continue to push yields—which mortgage rates follow—elevated,” he told Newsweek. “Looking into May, we can expect more rate volatility as investors and the Fed wait for more conclusive evidence of a return to low, stable and more predictable inflation.”
Buyers are still likely to be waiting for rates to fall but the key to the trajectory of rates will be how inflation performs over the coming months, said Holden Lewis, a home and mortgage expert at NerdWallet.
“Inflation remains stubbornly above the Fed’s target of 2 [percent], and mortgage rates won’t fall significantly until the inflation rate consistently drops for multiple months in a row,” Lewis told Newsweek. “Potential home buyers are holding back and waiting for mortgage rates to decline. The slowdown in home sales will allow the inventory of unsold homes to increase. That won’t stop home prices from going up, but it might slow down the pace of home price increases this summer.”
In May, policymakers from the Fed will reveal their latest rate decision and provide insights on the trajectory of borrowing costs. Also in May, the CPI inflation data reading for April will give insight into how prices are performing, which will give a signal to how rates might unfold over the next few weeks.
For the housing market, one silver lining may come from buyers who have to acquire homes due to personal situations.
Read more: How to Buy a House if You Have Bad Credit
“Purchases are likely to be dominated by movers who feel like they don’t have a choice to wait out higher rates, but rather, they have to move now for personal reasons,” Hale said.
Zillow’s Divounguy suggested that with mortgage rates expected to stay high, lower-priced homes could see escalated competition.
“We continue to expect significant competition this spring, especially for attractive listings on the lower end of the price range. New construction homes are selling well too; they’re available, and builders are offering financial incentives—such as rate buydowns and covering closing costs—to potential home buyers,” he said. “Remember, higher rates mean the home price a buyer can afford is lower, so if you’re shopping for a home in the mid-tier or lower, it’s best to assume you’ll run into some competition.”
Hale suggested that sellers, who can also be buyers, enter the housing market.
“With 80 [percent] of potential sellers having thought about selling for 1 to 3 years, it could be that higher rates are less of a deterrent this year than in the recent past,” she said.
The perspective from lenders appears to be that the 10-year treasury yields, currently at around 4.7 percent, will drop in the coming weeks to 4 percent and narrow the difference between mortgage rates and treasury rates.
“We expect the spread will tighten further by the end of 2024. The combination implies a 30-year fixed mortgage rate mostly unchanged in the coming weeks but eventually moving closer to 6.5 percent by the end of 2024,” Joel Kan, Mortgage Bankers Association’s deputy chief economist, told Newsweek.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
“The private label program was designed for brokerages like Village Premier Collection that have built successful businesses on their own, but that will benefit from the resources of a larger platform,” Real president Sharran Srivatsaa said in a media release. “I’m excited to welcome Village Premier to Real and look forward to a long and … [Read more…]
Our writers and editors used an in-house natural language generation platform to assist with portions of this article, allowing them to focus on adding information that is uniquely helpful. The article was reviewed, fact-checked and edited by our editorial staff prior to publication.
Buying a home doesn’t necessarily require a large down payment. The conventional wisdom is that you need 20 percent down, but in reality, you don’t have to save that much. In fact, there are no-down payment mortgage options. Here’s what you need to know about these types of loans.
A no-down payment mortgage is a home loan that allows you to finance 100 percent of the home’s purchase price without having to put any money down at closing. Zero-down mortgages can be particularly beneficial for those buying a home for the first time or with limited savings.
The easiest way to avoid a down payment is to qualify for one of the two no-down payment mortgage programs backed by the government: a USDA or a VA loan.
The U.S. Department of Agriculture (USDA) backs USDA home loans, a mortgage guarantee program for those buying a home in designated rural areas. There are many areas you might not consider “rural” that do qualify under USDA guidelines, so be sure to check your eligibility on the USDA website. USDA loans don’t require a down payment, but borrowers must meet credit and income requirements to qualify.
Although there’s no down payment with a USDA loan, there is an upfront guarantee fee of 1 percent of the principal loan amount, as well as an annual fee of 0.35 percent, which borrowers can roll into the cost of the mortgage. While you won’t pay any money initially if you choose to roll these fees into the loan, keep in mind that it adds to the total balance and will accrue interest over the loan term, which means you’ll pay more overall.
If you’re a military service member, veteran or surviving spouse, you could be eligible for a VA loan guaranteed by the U.S. Department of Veterans Affairs (VA) with no money down. There is no mortgage insurance requirement with this loan. However, like a USDA loan, you do have to pay an upfront funding fee, which can be rolled into the mortgage. The funding fee ranges from 1.25 percent to 3.3 percent of the loan amount. You can reduce the funding fee by making a down payment.
Another perk: VA loan lenders often offer more competitive rates for these products, which helps you save money over the life of the loan.
Compare: Current VA loan rates
In addition to government-backed loans, you might be able to explore:
If you don’t qualify for one of the no-money-down home loan options, you might still be able to buy a home with the next best thing: a low-down payment mortgage.
Insured by the Federal Housing Administration (FHA), an FHA loan requires only 3.5 percent down with a credit score as low as 580. (If you have a credit score between 500 and 579, you might be able to qualify with a higher down payment of 10 percent.) It’s a popular option for homebuyers with less-than-perfect credit and not a lot of savings. Like other government-insured programs, FHA loans are offered by private mortgage lenders, so you might also have to meet a lender’s criteria to qualify. Additionally, you’ll have to pay for FHA mortgage insurance, which adds to your monthly payment and the cost of the loan. You’ll pay these premiums for as long as you have the mortgage, in most cases.
Compare: Current FHA loan rates
Available through many mortgage lenders, the HomeReady program is a conventional loan backed by Fannie Mae. The down payment requirement on a HomeReady loan is just 3 percent. While you’ll have to pay mortgage insurance to compensate for the low down payment, it’s often at a lower price tag compared to other conventional loans.
Backed by Freddie Mac, Home Possible is a similar mortgage program to HomeReady, with a 3 percent down payment and mortgage insurance requirements.
Freddie Mac also offers a 3 percent down mortgage option for first-time homebuyers who qualify through its HomeOne program. The main difference between this loan program and Freddie’s Home Possible mortgage is that a HomeOne mortgage does not impose income limits.
Some lenders are now offering mortgage programs for borrowers who qualify that only require a 1 percent down payment. Some examples include Rocket Mortgage’s ONE+ program and United Wholesale Mortgage’s Conventional 1% Down program. For these programs, the lender pays 2 percent of the required 3 percent down payment for a HomeReady or Home Possible loan — or up to a maximum contribution that varies by lender and loan size — and you only need to provide the remaining 1 percent.
A Conventional 97 mortgage is another Fannie and Freddie program that only requires a 3 percent down payment. You might pay more for private mortgage insurance (PMI) with this type of loan, but your payment depends on your financial profile. You can also request to cancel PMI when you reach 20 percent equity in your home.
The Good Neighbor Next Door (GNND) program is for borrowers who work in select public service professions — teachers, firefighters, law enforcement and emergency medical technicians — and are planning to buy a home in a qualifying area.
The program, sponsored by the U.S. Department of Housing and Urban Development (HUD), provides a discount of up to 50 percent on a home with a down payment of just $100. The borrower must qualify for a first mortgage, and the discounted portion of the home comes in the form of another loan. If the borrower continues to meet program requirements, the second mortgage won’t have to be repaid.
The ability to buy a home with no or very little money down can be appealing, but there are drawbacks, too.
Deciding whether to go for a no-down payment mortgage depends largely on your financial circumstances and goals. Here are a couple of scenarios when a zero-down mortgage might be a good idea:
The Department of Veteran Affairs and the U.S. Department of Agriculture DA don’t set a minimum credit score requirement for, respectively, their no-money-down VA and USDA loans. However, most lenders offering these loans do, and they’d want them to be at least in the “fair” range: 620 for VA loans, 640 for USDA loans. Because you’re not bringing any cash to the table, and financing virtually all of your mortgage, the lender has to be extra-reassured that you pay your debts fully and on time.
Source: bankrate.com
So has Higginbotham. “We have 123 offices across the south and southeast side of the United States, and we are telling our partner offices there to opportunistically look to some of the mortgage lenders that are referring business to us for insurance,” Russell said. “And if there’s a good relationship there, and there’s somebody that … [Read more…]
Mortgage rates will probably remain above 7% in May as inflation resists the Federal Reserve’s efforts to bring it under control. It left rates unchanged at the conclusion of its April 30-May 1 meeting, and seemed as frustrated by inflation and high interest rates as home buyers are.
The Fed is trying to wrestle the inflation rate down to 2%. The central bank made progress toward that goal in the last half of 2023, and investors rang in the new year with hopes of a Fed rate cut by spring. But the inflation rate sprang a surprise: It hardly budged in the first three months of the year. Investors have convinced themselves that inflation will stick around for a while. Mortgage rates have moved higher as a consequence.
The 30-year mortgage leapt more than a quarter of a percentage point in April. Mortgage rates are unlikely to fall significantly until inflation wanes and the Fed signals that it’s getting ready to announce a rate cut. It’s unlikely that we’ll see such a turnaround by Memorial Day.
The outlook was sunnier just a few months ago. As 2023 turned to 2024, it looked as if inflation was waning in earnest. The core consumer price index had fallen every month since March. From that month to December, core CPI fell from 5.6% to 3.9%. Investors took it as a sign that inflation was headed toward the Fed’s 2% goal, and that the central bank would cut the short-term federal funds rate in the first half of 2024.
But progress on prices slowed dramatically in 2024’s first quarter, as if the inflation rate had deployed a parachute. In March, core CPI was 3.8%, or just 0.1 percentage point lower than in December. At that rate of decline, it would take more than four years for the inflation rate to drift down to 2%.
“In recent months, there has been a lack of further progress toward the committee’s 2% inflation objective,” the Fed’s rate-setting committee announced at the conclusion of the April 30-May 1 meeting.
The statement added that the Fed won’t cut rates until the committee “has gained greater confidence that inflation is moving sustainably toward 2%.” That seemed to push a rate reduction months into the future.
Financial markets now expect the Fed to wait until September or November before reducing the federal funds rate. The dashed hopes for a springtime reduction led lenders to raise mortgage rates in April.
The average rate on the 30-year fixed rate mortgage moved upward week after week throughout April. In Freddie Mac’s weekly rate survey, it averaged 6.79% in the last week of March, then marched upward to 7.17% in the week ending April 25.
Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors all predict that mortgage rates will fall over the next 12 months. Their forecasts have the 30-year fixed-rate mortgage dropping to below 6.5% in the first quarter of 2025, compared with an average of 6.75% in the first quarter of this year.
Home prices are rising along with mortgage rates. The combination of higher prices and mortgage rates is making it harder to afford a home. According to the Mortgage Bankers Association, the typical mortgage payment was $2,021 for home buyers who applied for mortgages in March. That was $108 more from 12 months earlier. This means that the median mortgage payment went up 5.2%. At the same time, the median income went up 3.5%, according to the MBA. House payments are rising faster than incomes.
Homebuilders have been offering relief in the form of temporary rate buydowns. With a rate buydown, the builder reduces the buyer’s house payments for the first one to three years. They do it by subsidizing the buyer’s interest rate.
Here’s an example of how a one-year buydown might work: The buyer gets a mortgage with a 7.25% interest rate, but the first 12 payments are based on a 6.25% interest rate. That gives the buyer a discount on the monthly payments for that year.
Builders do this in recognition of the effect of rising rates and prices. “To address affordability for home buyers, we are still using incentives such as mortgage rate buydowns and we have reduced the prices and sizes of our homes where necessary,” said Bill Wheat, the chief financial officer of D.R. Horton, a prominent homebuilder, in an earnings call April 18.
The takeaway is that some homebuilders are cutting rates, even if the Fed isn’t.
Source: nerdwallet.com