Quick answer: Yes, it’s possible for undocumented immigrants to get a mortgage loan. They face legal and financial obstacles that don’t stand in the way of other purchasers, but millions have done so successfully.
You don’t need to be a resident to own real estate in the United States. Many documented immigrants own homes. While it’s difficult to get accurate statistics about undocumented homeowners for a number of reasons, in 2014, the Migration Policy Institute estimated that around 3.4 million undocumented immigrants owned homes in the United States.
Keep reading to discover how your residency status impacts the home loan process. We’ll also highlight some important information you should know about your rights when applying for a mortgage.
In This Piece
How Residency Status Affects a Home Loan
Understand Your Rights
How to Get a Mortgage
How Residency Status Affects a Home Loan
Overall, residency status plays a significant role in determining the availability and terms of home loans for individuals in the United States.
Green Card Holders
Green card holders are permanent residents eligible for most types of mortgages available to U.S. citizens. This means they must provide proof of income, credit history and other financial documents to qualify for a home loan. In some cases, green card holders might face additional challenges during the home loan and purchase process. Those can include difficulty in obtaining mortgage insurance or a higher down payment requirement, which can vary based on the lender and the type of loan.
Refugees and Asylum Grantees
Refugees and asylum grantees are individuals granted legal status in the United States due to persecution or fear of persecution in their home countries. They may be eligible for certain types of mortgages. However, their ability to obtain a home loan might depend on their specific immigration status and financial circumstances. For example, refugees or asylum grantees who have been in the United States for less than 2 years might have a harder time getting a mortgage because many lenders require at least 2 years of residency to establish credit history.
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DACA
DACA recipients, or individuals who’ve been granted Deferred Action for Childhood Arrivals, are not eligible for most types of home loans. This is because they don’t have legal permanent residency status. However, some lenders may offer alternative financing options or assistance programs specifically designed for DACA recipients and other undocumented immigrants.
Additionally, DACA recipients who have obtained an Employment Authorization Document and can demonstrate a stable income and credit history may be able to get a mortgage under certain circumstances.
Understand Your Rights
The Fair Housing Act prohibits discrimination in housing based on race, color, national origin, religion, sex, familial status or disability. Immigrants, including those who aren’t U.S. citizens or permanent residents, are protected under the FHA and have the same rights as other individuals.
That includes:
The right to rent or purchase housing without discrimination based on national origin
The right to be treated the same as U.S. citizens or permanent residents in all aspects of the housing process, including advertising, application, screening and approval
The right to request reasonable accommodations in housing, such as modifications to the physical structure of a home or changes to policies or procedures, if disabled
If you believe you’re being discriminated against during the home loan, home buying or other housing process, you should report it.
How to Get a Mortgage as an Undocumented Immigrant
Undocumented immigrants aren’t usually able to qualify for mortgages through traditional services, such as those backed by Fannie Mae and Freddie Mac. However, individuals with an ITIN may be able to get approved for special loans from private lenders. An ITIN (Individual Taxpayer Identification Number) is a unique identifier the IRS uses to process tax returns and payments for those that do not have or do not qualify for a social security number.
Apply for an ITIN
The first step is to apply for an ITIN, or Individual Taxpayer Identification Number. You do this by completing Form W-7 via mail, in person at an IRS-authorized agent or in person at an IRS Taxpayer Assistance Center.
Save for a Down Payment
Because undocumented immigrants can’t usually qualify for federally backed loans, such as those through the FHA, they probably won’t qualify for mortgages with low down payment requirements. Private lenders may require down payments as much as 20% or even 30%. If an undocumented immigrant wants to buy a home, they should start saving as soon as possible. That might mean paying down other debt first.
Get Documentation Ready
In addition to the ITIN, undocumented immigrants will have to provide information to help qualify them for a private home loan. That information can include:
Proof of income, such as recent pay stubs, tax returns or other financial documents
Information about credit history, including any outstanding debts, loans or credit accounts
Recent bank statements that show account balances and transaction history
Identification documents, such as passports or government-issued IDs
Proof of residency status, such as a lease agreement or utility bill in the person’s name
Proof of employment or self-employment, such as a letter from an employer or recent tax returns
Apply for an ITIN Mortgage
Once you have an ITIN, a down payment and all the necessary documentation, you can apply for an ITIN mortgage. Start by browsing the mortgage options in the Credit.com marketplace.
Are you thinking about selling your engagement ring? People sell their engagement rings for all sorts of reasons, such as no longer being in a relationship or inheriting a ring. Whatever your reason may be, you can most likely sell your engagement ring and make extra money. You can use this extra money towards paying…
Are you thinking about selling your engagement ring?
People sell their engagement rings for all sorts of reasons, such as no longer being in a relationship or inheriting a ring.
Whatever your reason may be, you can most likely sell your engagement ring and make extra money.
You can use this extra money towards paying off debt (like credit card debt or student loans), starting an emergency fund for unexpected expenses (like medical bills, vet visits, or house repairs), putting the money into your retirement savings, or even saving for financial goals (like a home deposit, buying a car, or going back to school).
Today, you’ll learn how to:
Get your engagement ring appraised
Negotiate for the highest price
Find the best place to sell your engagement ring
And, of course, the step-by-step process of how to sell an engagement ring!
How To Sell An Engagement Ring
How much is an engagement ring worth?
Before you sell your engagement ring, you should try and figure out how much it is worth.
One of the things to think about when valuing a diamond engagement ring is the “4 Cs of a Diamond.” If you want to know where to sell diamond rings, first you must figure this out.
The 4 Cs stand for:
Carat – This is the size of the diamond. Larger diamonds are usually worth more money.
Cut – This is not the diamond shape. Instead, this is the quality of the diamond’s cut which will impact how beautiful and brilliant the diamond is.
Color – A diamond’s value increases with less color, as a completely colorless diamond is worth more.
Clarity – Clarity is all about the imperfections and blemishes that a diamond may have. The fewer there are, the more valuable the diamond.
Other things that may increase or decrease the value of your used engagement ring include:
Condition – The overall condition of the ring is important. A ring that has been taken care of and shows minimal signs of use will typically hold onto more of its value in comparison to a ring that displays noticeable wear and tear.
Resale market – Rings with a popular style or from a well-known designer may see a higher price when resold.
Certification and documentation – Having a document such as a diamond grading certificate can help determine the quality of the ring.
Designer and brand name – Rings from certain designers or brands (such as Cartier or Tiffany & Co.) tend to have a higher resale value due to their reputation and craftsmanship.
Even though a pre-owned engagement ring may have a lower value compared to a new one, it can be a great value for buyers looking for a high-quality ring at a more budget-friendly price. And, that is why people buy them – they can save some money over a new ring.
Recommended reading: 8 Items To Sell Around Your Home For Extra Money
Gather documentation for your engagement ring
If you’ve decided to sell your engagement ring, it’s time to collect all of your paperwork related to the ring such as the diamond’s certification, receipts, and appraisals.
These documents will help figure out the ring’s value, establish its authenticity, and make the process of selling a little more smooth.
Here’s a list of the paperwork you might need:
Appraisal certificate – The appraisal certificate is a professional evaluation of the engagement ring. This document includes details about the diamond’s cut, color, clarity, carat weight, and quality.
Original receipt – Having the original receipt from the purchase of the engagement ring will help show that the ring is authentic.
Diamond certification – If the diamond was graded and certified by a recognized gemological laboratory, this can be helpful.
Gemstone certificates – If your engagement ring has other gemstones besides diamonds, include these certificates for the stones as well.
You don’t need any paperwork to sell an engagement ring, but, it can make things a little easier and may get you a little more money.
How to get an engagement ring appraised
Getting an engagement ring appraised by a certified gemologist or jewelry appraiser will give you an accurate estimate and valuation of how much your engagement or wedding ring is worth.
This can help you when negotiating (such as with a pawnshop) and simply knowing the amount that you should be looking for when selling your ring.
You can get your engagement ring appraised by:
Looking for appraisers – You can search online for certified gemologists or jewelry appraisers in your area. You can also ask local jewelry stores for their recommended appraisers. It’s important to find an appraiser with credentials from places such as the Gemological Institute of America (GIA), the American Gem Society (AGS), or the International Society of Appraisers (ISA).
Contacting the appraiser – Call the appraiser and ask for their fees and to schedule an appointment. You may need to bring documents such as receipts, certificates, or previous appraisals for the ring.
Getting the ring appraised – Take the engagement ring to the appraiser. They will examine the engagement ring’s characteristics including the diamond’s cut, color, clarity, and other important factors.
Receiving the appraisal report – Once the appraisal is done, the appraiser will provide you with the report. This report includes information about the ring’s characteristics as well as an estimated value based on the current market. Ask the appraiser any questions you might have or if you need a question answered.
Where to sell an engagement ring
Now is the time to look at your different options for selling the ring. You can sell engagement rings at jewelry stores, pawn shops, online marketplaces, auction houses, consignment shops, and more.
Some things that you will want to about when deciding where to sell your engagement ring include the amount that they are giving you (of course, you want the most money, right?), the fees that they may be charging to sell your ring, how much work it will take you to sell it (for example, do you have to create the listing or do they?), whether you feel safe meeting someone to exchange the ring for cash in-person, and more.
As you can see, there are going to be pros and cons for each of the places where you can sell your jewelry.
Below, I go further into each of the best places to sell an engagement ring:
1. Sell your engagement ring online in a marketplace
If you want to sell your engagement ring, one of the best ways to get the most money for it is to sell it online.
Selling your engagement ring online can be convenient and also help you reach a wider audience of possible buyers.
Some of the different places you can sell an engagement ring online include eBay, Facebook Marketplace, and Craigslist.
Here’s a step-by-step guide to help you sell your engagement ring online:
Make your ring presentable – You should clean your ring and take quality photos of it from different angles.
Choose the marketplace – There are many different sites to sell your engagement ring like eBay, Craigslist, Facebook Marketplace, specialized jewelry-selling websites, or online auction sites.
Create a detailed listing – In the listing, write a detailed description of the ring along with its condition and any unique features. Be honest about any imperfections. When listing your ring for sale, you should also describe the ring, such as the diamond’s cut, color, clarity, and carat weight.
Set a price – You should research similar engagement rings or get your ring appraised to find the most accurate price based on current market value.
Shipping – If you’re shipping the ring, make sure to package it securely to prevent any damage in transit and also pay for shipping insurance.
2. Sell your engagement ring on Worthy
Similar to the above, some websites are dedicated to selling jewelry and valuables, such as Worthy.
Worthy does not buy your engagement ring directly as that is not their business model, but they will clean it up and sell it for you.
Worthy makes it really easy to make money with your engagement ring and this is the best place to sell engagement rings online. You simply ship your jewelry to their office with a prepaid shipping label (a FedEx label) that they give you (it’s insured as well). Then, once they get the ring, they prep it for auction. They will clean the ring, take professional photos of it, and grade it.
After that, your ring will go up for auction, and professional jewelry buyers can bid on it. You can set a reserve price that you are comfortable with. Once the auction is done, you will receive the final sale amount after Worthy’s fee. Payment is then sent to you within 1-5 days.
The whole process typically takes around 2 weeks from shipping to getting paid.
So, what are Worthy’s fees? They do almost all of the work for you, so it makes sense that they would charge a fee. They take 18% for up to $5,000. After that, it is a 14% fee for $5,001 to $15,000, a 12% fee for $15,001 to $30,000, and a 10% fee for over $30,000.
So, for example, I found a 1-carat diamond ring on Worthy that eventually sold for $2,792. That means the seller received around $2,289 after the 18% fee that Worthy charges.
3. Work with a jeweler
Jewelers may offer to buy your engagement ring. You can simply call around local jewelry stores near you and ask if they buy used engagement rings.
Sometimes this can be the most straightforward and convenient option for selling your engagement ring as you can possibly sell your ring the same day.
To sell your engagement ring to a jeweler, you will want to look for jewelry stores near you and give them a phone call to see if they buy used engagement rings. I recommend looking for ones with positive reviews.
If you have any documentation for your ring then make sure to bring it with you so that you can show the jeweler.
If they are interested in your engagement ring, then they will give you an offer. If you’re happy with the offer, then you can ask any other questions and possibly sign paperwork to get your cash.
Jewelers may offer instant payment either via cash, check, or electronic transfer and you will want to confirm the payment method before completing the sale.
4. Sell your engagement ring to a consignment shop
You may decide you want to sell your used engagement ring to a consignment shop. Consignment shops have benefits such as offering exposure to multiple buyers. However, they likely charge a commission fee.
To sell your engagement ring through a consignment shop, you will want to Google search for consignment shops in your area and specifically look for shops that sell jewelry or high-end items (make sure the shop has good reviews and even testimonials of previous successful sales of engagement rings).
Once you have an idea of which consignment shops you’re interested in selling your ring at, you should ask them questions about their consignment process, what commission rate they charge, and the terms of the sale.
Then, you’ll give the shop the ring to display in their store.
The consignment shop handles the transaction if someone is ready to buy the ring. You’ll receive payment after the commission fees are taken out.
5. Sell your wedding ring to a pawnshop
When people think about where to sell an engagement ring, one of the first places they think about is probably a pawn shop.
And, it makes sense – pawn shops make it very easy and you can sell your engagement ring for cash here. You can most likely even get paid on the same day!
But, you should keep in mind that they usually give you the lowest amount of money.
If you want to sell your old wedding ring to a pawn shop you will first want to make sure the ring looks nice and clean because that can help you get a better price. Get any papers you have about the ring, like appraisals or certificates, to show how much it’s worth, and make sure you know this number before you go in because you will most likely have to negotiate.
Now, when selling at a pawn shop, you can typically negotiate. To do so, you will want to find out the ring’s value, current market trends, and comparable sales. You can even make a better case for your price by showing documents on the ring and appraisals from certified gemologists. If the pawn shop cannot meet that price, you may just want to move on and try to find another buyer.
When the pawn shop makes an offer, remember they need to make a profit too, so it might be lower than you expect. If you’re not happy with the offer, you can try selling it to someone else. If you agree to sell it, you’ll need to show some ID, sign some papers, and then you’ll get paid.
Frequently Asked Questions
Below are answers to common questions about how to sell an engagement ring.
Is it possible to sell an engagement ring?
Yes! Many places buy engagement rings and wedding rings so that you can make money.
How much can you get for selling your engagement ring?
The amount of money that you can get for selling your engagement ring will vary and usually, you can earn anywhere from around 20% to 60% of what was originally paid for it. Yes, this is a wide range (and can mean a difference of hundreds or even thousands of dollars) and this is because there are so many factors that come into the price, such as the condition of the ring, the market demand, and where you decide to sell it.
How much can I sell my 1 carat engagement ring for?
A 1-carat diamond engagement ring will vary due to the 4C’s (cut, clarity, color, and carat). Usually, you can earn around $1,000 to $5,000 for selling a used engagement ring that is 1 carat.
Is it better to sell or pawn an engagement ring?
This depends – do you want to get the ring back? If you decide to sell it, you can get cash right away. This is a good option if you need money quickly.
On the other hand, if you decide to pawn it, the ring can be used as collateral for a loan. This can be a temporary solution if you just need cash right now but you want to get the ring back later. However, it’s very, very important to carefully read and understand the terms and interest rates from the pawnshop so that you can eventually get your ring back.
Why is the resale value of diamonds so low?
So, you may be thinking “But, I paid $10,000 for this ring! Why am I only getting a few thousand dollars?”
You most likely won’t get the same price that the engagement ring was bought for. This is because places that buy your engagement ring still need to make a profit. Plus, they aren’t going to sell the engagement ring for the same price as a brand-new ring.
How can I be safe when selling a ring?
If you aren’t shipping the ring but are meeting in person instead, then you must be careful. You should avoid sharing personal information until you’re 100% sure they are the person they say they are.
I also highly recommend meeting in a public place, such as a police station parking lot. Bringing a family member or friend with you to the appointment or meeting is good so that you aren’t alone. Make sure to use secure payment methods like cash and do not share bank account information, your social security number, or any other sensitive information (buyers do not need this information!!). Also, ignore requests to send the ring before receiving payment and make sure the payment has cleared before proceeding.
Where to sell my wedding ring after a divorce? Is it OK to sell a wedding ring after divorce?
Many people sell their wedding rings after a divorce. If you decide to do so, you can sell your wedding ring on sites like Worthy, Facebook, eBay, and more. Before you sell your engagement ring, though, you should make sure that the ring is legally yours (check your divorce agreement).
How long does it take to sell an engagement ring?
The amount of time that it takes you to sell an engagement ring depends on where you are selling it. For example, selling a ring on Worthy will take around 2 weeks (it takes a little longer to sell on Worthy, but you may get the best price for your diamond jewelry this way because they have many diamond buyers). Whereas, selling it to a pawn shop may mean that you get paid the same day (however, it’s typically for a lot less money).
What is the best way to sell an engagement ring?
The best way to sell your engagement ring depends on what you’re looking for and there is no one best answer for everyone. Do you want to sell your ring for the most money? Or, do you want to sell your engagement ring as fast as you can? Some people may want to just sell the ring to a pawn shop and get it over with. Others may want to take their time and sell it online so that they can get the most money.
How To Sell An Engagement Ring For The Most Money
I hope you enjoyed this article on how to sell your engagement ring for the most money.
Deciding to sell an engagement ring is a big decision to make as you may have an emotional connection to it. Due to this, you should take your time deciding what to do and choose the option that feels best for your situation.
Some of the best places to sell diamond rings include online (such as through Worthy or eBay), or in-person at a consignment shop or to a local jeweler. Many of the places above can be used for selling other pieces of jewelry as well, such as fine jewelry, bracelets, necklaces, earrings, and more.
Each place has its pros and cons. Some will pay you a lot more than others, but some may be much easier and quicker.
I hope you can find the best place to sell your engagement ring and that you get the most money!
Have you tried selling an engagement ring? What do you think is the best place to sell an engagement ring?
However, a silver lining in the subdued housing market is the strength in new-home sales. Builders are providing rate buy-downs for first-time homebuyers, which aligns with their interests, Duncan explained.
Read on to learn more about Duncan’s views on the housing market, loan performance and affordability challenges homebuyers face.
This interview was condensed and lightly edited for clarity.
Connie Kim: The Federal Reserve decided to keep the benchmark rate unchanged in the target range of 5.25%-5.5%. With the majority of Fed officials expecting another rate hike before the end of 2023, how do you think this decision will affect housing and your forecast for the economy?
Doug Duncan: It’s our forecast that they won’t make another change until they drop rates. I think the forwards suggest that in either November or December, there’s a 50/50 chance to make an increase. I would say the risks are tilted that way, but we don’t have it in our forecast model.
We don’t have (the Fed) dropping rates until the end of Q2 next year, and we have a mild recession that starts in that quarter.
The reason that forwards are suggesting a 50/50 chance of another increase is that growth has been stronger than anticipated. We actually think that’s going to slow; I think that this is kind of like a final burst of activity.
Wedon’t know what third-quarter growth was. Our expectation, at an annual rate, is it’s north of 3%. If there’s another quarter like that, and oil prices have pushed to $100, then I think you get another quarter-point move by the Fed, especially if you don’t see a substantive change in employment.
Kim: Spreads in the mortgage space are wide. What are the reasons for that?
Duncan: There are several reasons for that. If that business flow for a time period helps them cover the variable costs, then it can be effective.
For one thing, no fixed-income investor thinks that mortgage-backed securities with 7% mortgage rates will be there when the Fed finishes the inflation fight. They’re going to cut rates and that will prepay. So you’re having to encourage investors with wider spreads to accept that.
It’s also the case that the Fed is running its portfolio off because they don’t talk about it much. But somebody has to replace the Fed, and the Fed is not an economic buyer. That is they weren’t buying for risk-return metrics; they were buying to affect the structure of markets. So they are a policy buyer.
They were withdrawing volatility from the market, and they were lowering rates to benefit consumers. When [the Fed] is replaced, it’s likely to be by a private investor who’s going to have yield expectations. They may require wider spreads than the Fed because the Fed is not an economic buyer.
Kim: A bit of good news for lenders in Q2 was that their production volume went up and origination costs went down. Are you optimistic this trend will continue?
Duncan: If rates stay at the 7.25% level, it’s going to be worse, not better. On the production side, the mortgage business is in recession because the levels of existing-home sales are back where they were at the end of the great financial crisis at around 4 million units. That’s very low historically.
I don’t see how it can go much lower than that. Even if we have a recession, we don’t see it going just a hair under 4 million. The reason why some of the headlines look good about housing is because house prices were expected to fall when rates ran up. They did for a quarter as households sort of adjusted to the idea that they were going to be running at a new higher level.
But prices are rising again. For existing homeowners, that’s good news because it means equity accumulation. But if you’re a first-time buyer, that’s not good news because it means it’s harder to qualify — especially with interest rates where they are.
Production is in a recession. The servicing side of the business is doing very well because those loans are simply not going to prepay for a long time. So, the servicing valuation on those loans is strong, because pre-payments are low. It’s a bifurcated market in that sense. We expect production volumes to remain low through 2024 and start to pick up maybe toward the end of 2024.
Kim: The silver lining in the current housing market is an uptick in new construction sales due to a lack of existing-home inventory. To what extent builders will offer rate buy-downs to drive sales remains to be seen. How likely are builders to support rate buy-downs, especially when it’s becoming expensive to do so?
Duncan: The traditional way in which builders gave borrowers choices regarding affordability was to offer them granite countertops. So if sales volume slows, they will throw in granite countertops, finish the basement or finish out the garage.
In doing interest rate buy-downs, they’re focused more on the problem of the first-time buyer. That’s because [the cosmetic] attributes of a house are more for move-up buyers. Builders recognize they’ve got to do something for affordability for the first-time buyer.
The share of new-home sales that are going to first-time buyers is the highest it’s ever been. The share of total sales that are new-home sales is also the highest it’s ever been. This is a highly unusual structure for the market.
The builders know that those loans are likely to get refinanced, even if they buy down two points. So they go from 7.5% to 5.5%. When the Fed is done with the inflation fight and if economic growth is back to the 2% to 2.5% level, mortgage rates will probably run to 4.5% to 6% over the cycle. These loans are going to refinance, and the consumer will be in good shape, building equity to become a move-up buyer. So there is an alignment of interests for the builders in doing this.
Kim: The housing market was relatively active during the spring and summer homebuying seasons despite lower historical sales than previous years. Looking ahead, do you see another rough Q4 like last year when rates surged? What are some factors that Fannie Mae is monitoring?
Duncan: If growth surprises to the upside, that will get the Fed to increase interest rates, which will push [mortgage] rates again. That would be the biggest challenge and just seasonality; the fourth and first quarters are the low points for seasonality.
Kim:Bankruptcies and layoffs are still happening. How far are we into the industry’s consolidation?
Duncan: I was looking at the bankruptcy data. It’s just gotten back to the pace of bankruptcy we saw in 2019. It is true [consumer] bankruptcies have been rising but from extremely low levels. I actually expect that to continue. In part, that’s because some businesses (probably smaller and midsized businesses) were kept going by very low interest rates for a very long time.
In the mortgage space? Certainly, you’ll continue to see exits from the business. Typically, mortgage companies are not publicly owned. So it happens quietly. It’s people in the industry that know who the players are that are in trouble. The employment data comes out on a lag basis for brokers and loan officers. So that has picked up. I would expect more.
Kim:Executives at Dark Matter Technologies noted that lenders are most interested in bringing down their origination costs and retaining their clients in this rising-rate environment. What other demands do you see from lenders?
Duncan: They have been investing in technology — primarily consumer-facing technologies to get business in the door. Now, that’s not a possibility. Because of the changes in interest rates and a drop-off in demand, they are now focused on tech investments that go into cost savings.
They are turning their attention to what they can do to lower origination costs. Can they convert fixed costs to variable costs? That’s really the question that the industry has to focus on. If they can convert fixed costs to variable costs, then when the cycle changes, they don’t get hit as hard by the drop-off in this business. That’s because the operating structure also drops off.
Kim:I notice a lot of independent mortgage banks roll out down payment assistance (DPA) programs for conventional loans. DPA programs were predominantly for FHA loans. What are the pros and cons of IMBs rolling out DPA programs for conventional loans?
Duncan: For the independent mortgage companies, down payment assistance gets the business through the door, right? If they’re covering their variable costs, they can keep going for a while and, eventually, they have to cover the fixed costs.
The question is, what are the other credit characteristics of the borrower? If they are an IMB, they have to place it with an investor. So the investor will be monitoring. For example, if it’s Fannie Mae or Freddie Mac, we monitor that. We look at making sure there are not layered risks in any consumer’s profile. For example, if they have a spotty employment record, but they’ve always paid their bills on time, and they have savings, they’ve got money to pay 20% down, then it would probably be acceptable to have that spotty employment record. But if there’s a spotty employment record and a spotty repayment record on their credit, that’s not going to make it through the screen.
Kim: DPA programs offered with FHA loans come with higher rates. If the FHA loans layered with a DPA are more costly, how do first-time buyers benefit from these programs?
Duncan: The question you ask is a really interesting social question. The foreclosure rate for FHA loans is higher than the foreclosure rate for VA loans or Fannie Mae or Freddie Mac loans. Fannie and Freddie are the lowest; VA is a little bit higher. FHA is the highest. There’s not a clear answer on what’s the optimal rate of foreclosure.
If [that rate] is zero, we can get to zero. But we aren’t going to be making very many loans. So there is some optimal level of risk-taking to help people realize their hope of owning a home. But it’s not a hard and fast number. Different people have different points of view on that.
Article originally published December 13th, 2017. Updated February 16th, 2023.
Buying a home is an extensive process. It includes marshaling your assets, reviewing your credit—and potentially trying to improve it—and shopping for a house that meets your wants and needs. That’s all before you enter the process of applying for a mortgage and considering your offers.
The process can be daunting, but it’s important to take one step at a time to avoid becoming overwhelmed. One area where people become especially concerned is the overall cost of a home loan. Securing a mortgage can be challenging, but how can you get a good interest rate to reduce the long-term cost of your home?
Here are some tips to help you get the best rates for mortgages. Just remember that many of these tips take time, so plan months or even years ahead for your homebuying journey.
In This Piece
Tips for Getting the Best Interest Rate on Your Mortgage
When you’re looking to secure a mortgage or get the best possible interest, personal finances really matter. Our tips include those related to your credit history, savings and income, along with some advice about educating yourself on mortgage terms and interest types.
Understand Interest Rate Types: Fixed vs. Adjustable
A fixed-rate mortgage has the same interest rate throughout the loan’s entire life. This makes your rate and monthly payment predictable and consistent. An adjustable-rate mortgage comes with an interest rate that can change—and often one that could increase if interest rates in the market increase. This can make your rate and monthly payment unpredictable.
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Knowing your plans for the future can help you understand which type of interest rate is best for you. If you only plan to hold on to the home for a few years before selling it to upgrade, an adjustable-rate mortgage—or ARM—might work for you. This is especially true if interest rates are currently low, as an ARM loan tends to start with lower rates than fixed-rate mortgages when all other factors are equal.
Keep Your Credit Healthy
You do typically need decent credit to secure a mortgage, but there are options for those with lackluster credit. While the credit score required to buy a home depends on many factors, the better your score, the better rates you may be able to command. Interest rates are a huge factor in how much your monthly payment is. Better credit typically equals more favorable rates, which equals lower monthly payments.
Make a Bigger Down Payment
The larger your down payment, the lower your overall loan amount is. That can lead to a lower interest rate when you secure a mortgage. That’s because your interest rate is partially based on your home’s loan-to-value, or LTV.
For example, if a home is worth $200,000 and the loan is for $199,000, that would be considered a high LTV and is riskier for a lender. That could lead to a higher interest rate. If the ratio is lower, however, you might be rewarded with a lower interest rate.
Have Stable Income
If you can prove that your line of work is in high demand with no sign of slowing down, or if you work for a large, profitable company, your lender may take this into account when processing your paperwork. Income stability demonstrates that you’re less likely to miss mortgage payments.
You can also demonstrate income stability by income history. Documents that show a stable income, such as check stubs, W2 forms and tax returns, might all be required by a mortgage lender when evaluating you for a loan.
Lower Credit Utilization Ratio
Credit utilization refers to how much of your available credit you’re actively using. A high credit utilization rate occurs when you use a large percentage of your available credit. For example, if you have $10,000 total in credit limits across your credit cards and you have a total balance of $5,000, that’s a credit utilization rate of 50%.
The Consumer Financial Protection Bureau notes that keeping your credit utilization at 30% or lower helps improve your credit score, which can lead to better interest rates for mortgages. It can also ensure mortgage lenders don’t see you as using credit in a desperate or risky way, making them more likely to approve you and offer better rates.
Make Mortgage Point Payments
It’s possible to pay extra directly to your lender to lower your interest rate. For every one percent of your loan amount you’re willing to pay upfront, you may be able to get as much as half a percent off your home loan interest rate. Essentially, you’re just paying a larger amount of interest upfront, and this is known as buying points.
Have Enough Savings
Most people know they should have enough savings to cover about 6 months’ worth of bills. Proving to your lender that you can still pay your mortgage in the event of a job loss because you have cash on hand can help you score a lower interest rate.
A Final Word on Getting the Best Interest Rates for Mortgages
Keeping your finances healthy is the best way to protect yourself when applying for loans. Do the work ahead of time to ensure you’re ready to apply for a mortgage. Then, you can start by comparing rates online to secure a mortgage that works for you.
Mortgage rates remained well above 7% on Thursday as markets digested Wednesday’s Fed meeting.
Freddie Mac‘s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, shows the 30-year fixed rate averaged 7.19% as of Sept. 21, up one basis point from last week’s 7.18%. By contrast, the 30-year fixed-rate mortgage was at 6.29% a year ago at this time.
“Mortgage rates continue to linger above 7% as the Federal Reserve paused their interest rate hikes,” Sam Khater, Freddie Mac’s chief economist said.
Elevated mortgage rates weigh negatively on the housing demand, and by extension on homebuilders, Kharter added.
“Builder sentiment declined for the first time in several months and construction levels have dipped to a three-year low, which could have an impact on the already low housing supply,” he noted.
Other indices showed different mortgage rates this week.
HousingWire’s Mortgage Rates Center showed Optimal Blue’s 30-year fixed rate for conventional loans at 7.22% on Wednesday, compared to 7.16% the previous week. At Mortgage News Daily on Wednesday, the 30-year fixed rate for conventional loans was 7.33%, up from 7.22% the previous week.
Members of the Federal Open Market Committee expect interest rates to remain elevated for longer than had been expected
The Fed paused its rate hikes yesterday as several economic indicators — including the improved core CPI figures, lower job openings, and higher unemployment rate — point towards a cooling economy. However, members remained cautious and the committee’s updated outlook implies a forthcoming monetary policy that is “tighter for longer,” Jiayi Xu, economist at Realtor.com said.
“With the year-end projection for 2023 remaining at 5.6%, we are drawing closer to another potential rate hike as the year approaches its end,” she said.
Furthermore, the expected policy rate for the conclusion of 2024 and 2025 is now half a percentage point higher than what was anticipated back in June, reinforcing the trend toward a more restrictive monetary policy in the path forward.
While higher interest rates indicate additional hurdles to come for the housing market, the fall typically ushers in more favorable buying conditions compared to the rest of the year, according to Xu.
“For those looking to purchase a home in this tough year, the first week of October will emerge as the best time to make a move,” Xu said.
Historical data suggests that during this particular week, home prices tend to dip below their peak levels, competition subsides, and the housing inventory expands compared to the busy summer months, she explained.
Meanwhile, homebuyers who can’t afford to buy a house in today’s market can rely on renting as rental prices are going down.
Intercontinental Exchange, Inc. (ICE) and investment research firm Delta Terra Capital announced a partnership to offer climate-adjusted credit risk analytics for residential and commercial mortgage-backed securities (MBS).
The credit risk analytics will combine ICE’s physical climate risk data and DeltaTerra’s climate analytics, financial risk models, and market data to deliver risk impact estimates for investors in the residential and commercial mortgage-backed securities markets.
By combining key data from both firms, the service offers a climate risk analytics solution that provides insights at the property, loan, deal, and bond levels, which is easily translated into investment analysis, both firms said.
ICE and DeltaTerra’s joint solution aims to translate physical climate risk estimates into financial risk assessments, including asset price depreciation risk and default risk for mortgage-backed securities.
“Our climate risk data can help inform investment decisions of U.S. municipal and MBS market participants by providing transparency into securities climate risk exposure,” said Evan Kodra, head of sustainable finance R&D at ICE.
ICE’s physical risk climate data applies geospatial climate, economic, and demographic data to specific U.S. municipalities, MBS pools, and related fixed income securities.
The DeltaTerra Klima suite of climate risk analysis tools provides metrics and reports for securitized credit investors who manage risk in some of the most climate-exposed capital markets, such as RMBS, CMBS, and credit risk transfer securities (CRT).
“The Klima models and analytics are an important toolkit providing transparency into whether markets are adequately factoring in future insurance costs and other climate-related fundamental drivers when buying and selling property, loans, and related securities,” David Burt, CEO at DeltaTerra, said.
DeltaTerra Capital is an investment research and consulting firm focused on climate risk analysis for institutional investors.
Its DeltaTerra Klima suite of proprietary models bridges climate science and investment science by translating scientific estimates of physical risk into actionable investment insights, according to the firm.
The housing market will remain subdued until the Federal Reserve starts cutting rates next year, according to economists and housing pros following the central bank’s Wednesday announcement to leave the benchmark rate unchanged in the target range of 5.25%-5.5%.
Until interest rates come down, affordability challenges will continue to put first-time buyers on the sidelines, housing industry observers said. Real estate experts reiterated caution against further rate increases.
While Fed Chair Jerome Powell emphasized incoming data will determine whether the central bank will raise its federal funds rate at its next FOMC meeting in November, the “dot-plot” of rate projections showed policymakers foresee one more hike by the year-end. The bulk of central bank officials expect to have interest rates finishing the year at around 5.6%.
In an elevated rate environment, the lack of inventory continues to be the biggest challenge for many potential buyers, the Mortgage Bankers Association said.
“While homebuilder sentiment is clearly impacted by the recent surge in mortgage rates, permits for single-family homes provide a positive outlook for the pace of construction in the year ahead. If mortgage rates trend down in 2024 as we anticipate, the combination of more homes for sale and somewhat lower rates should support stronger purchase volume,” Mike Fratantoni, SVP and chief economist at the MBA.
The MBA expects mortgage rates should begin to reflect that the Fed’s moves in 2024 will be cuts – not further increases. MBA’s mortgage finance forecast projected the 30-year fixed mortgage rate to decline to 5.4% in 2024 and 5.1% in 2025.
Powell also noted in a press conference that because people locked in “very low rate mortgages, even if they want to move now, that would be hard because the new mortgage would be so expensive.”
Rates are most likely to stay elevated until 2024, said Danielle Hale, chief economist at Realtor.com,thus putting a damper on the number of home sales transactions.
“Higher mortgage rates have radically altered homebuyer purchasing power and have been a key factor in existing home sales dropping from a more than 6.5 million unit pace in early 2022 to the roughly 4 million unit pace in recent months,” Hale said.
More importantly, higher mortgage rates continue to keep existing homeowners sidelined, with as many as one in seven buyers out of the market because they don’t want to borrow at today’s much higher rates, Hale noted.
Short-term mortgage rate movement
In the short-term, mortgage rates are likely to bounce around a bit as the markets digest upcoming economic data, Melissa Cohn, regional vice president of William Raveis Mortgage, said.
Incoming data of job and CPI reports next month will provide more clarity on how strong the economy is. Reports on jobs and inflation will be released on October 6 and October 12, respectively.
“If the data reveals that inflation remains elevated and employment is still growing, then mortgage rates are likely to move up and we can look for what we hope to be the last rate hike of this cycle,” Cohn said.
The rapid ascent is mostly behind us but it will be a while before the economy sees any sign of a gradual descent, Marty Green, principal at mortgage law firm Polunsky Beitel Green, added.
“In my view, this means the mortgage interest rate environment will continue to bounce sideways through the next several months,” Green said.
Mortgage rates have been on an upward trend this year with rates in August surging to 7.23%—the highest since 2001.
Fed officials expect interest rates to be at 5.1% in 2024, up from the 4.6% projected in June. Officials expect fewer cuts in 2025 with the median estimate for the benchmark rate to be at 3.9%, up from 3.4%.
The committee raised its projections for growth, and is looking for a better-than-expected labor market as well, with the jobless rate peaking at 4.1%, rather than 4.5%.
Pushback against further rate increases
With two more scheduled FOMC meetings in November and December, housing experts cautioned against further rate increases.
The Fed must consider the potential economic damage arising from any future rate hikes, Lawrence Yun, chief economist at National Association of Realtors, reiterated his position.
“Commercial real estate has come under stress from higher interest rates, which will further negatively impact community banks due to their large exposure to the sector. Therefore,the Fed needs to wait and not raise rates. Possible interest rate cuts then need to be considered once inflation is fully under control,” Yun said.
Overall data point to an accelerating slowdown but continues to be mixed because of some lagging indicators, Green noted.
Unemployment rates and the CPI component lags measures of market rents by around a year.
“With rates elevated into restrictive territory, I expect the Fed to be patient and hold off on any additional increases until it becomes clearer that an additional rate hike is warranted,” Green said.
The same home insurance scenario being played out in states like Florida and California due to elevated risk of natural disasters is becoming more pronounced in the Pacific Northwest according to a new report from the Seattle Times.
Dozens of state residents have appealed policy limitations, cancellations or site-unseen denials to the Washington Office of the Insurance Commissioner. In one described case, a homeowner was told that there was nothing the state could do about the outright denial of a policy, which was followed by that office marking the complaint closed.
“The number of such complaints reported since 2022 is roughly 10 times higher than the annual average of the previous six years and speaks to a growing problem for Washington residents: insurance companies using wildfire risk scores to discontinue insurance policies,” the report explained.
Such risk models were first developed by the federal government in an effort to help homeowners withstand potential disasters, but they’re increasingly being used by the insurance industry to inform underwriting decisions.
“Yet the models used to deny coverage are far from uniform and often obscured from consumers, making their use largely at the will and interest of the company,” the report said. “Insurers employ various third-party vendors that draw from different data sources and consider different factors for insurability.”
The use of wildfire risk scores that aim to predict the possibility of a home being destroyed by a natural disaster is an increasingly common practice nationwide. Limitations on insurance coverage stemming from such scores are causing lawmakers in other states — particularly California — to try and legislatively address such concerns from constituents.
One such law passed earlier this year in Oregon, aiming to “block state risk maps from influencing insurance policymaking,” the Times reported. California publicly tracks insurance nonrenewals to provide risk assessment transparency and to allow its citizens to appeal their scores, but those policies don’t exist in Washington.
“We unfortunately cannot tell or force the company to reinstate the policy,” state compliance analysts reportedly wrote to state residents filing complaints about lost insurance. “No violation found.”
When reached by the Times, a representative of PEMCO Insurance said the company made the “difficult decision” to reduce less than 1% of coverage to homes in Pacific Northwestern states like Washington and Oregon.
“Because of the changing dynamics of wildfire risk and our concentration of homeowners policies, however, a policyholder can do all these things [to reduce risk] and we are still no longer able to insure their property,” said Dawn Lee, a vice president with PEMCO, to the Times.
Lee went on to cite issues including the increasing risk of natural disasters, ongoing economic inflation and the increasing construction of homes in wildfire-prone areas as informing the decisions of PEMCO and other insurers.
Residents also said that the policies they were able to obtain come with much higher rates and, in some cases, provide coverage for less than half the value of a home, according to consumers who spoke with the Times.
According to an analysis by the First Street Foundation, the number of homes at risk of wildfires is expected to grow by as much as 30% over the next 30 years, with much of the risk currently concentrated in the central and eastern parts of the state stretching between the cities of Wenatchee and Spokane. Risk is projected to grow negligibly for Western Washington residents in and around the Seattle area, the most populous part of the state.
In the week leading up to the Federal Open Market Committee meeting, mortgage applications finally ticked up.
For the week that ended Sept. 15, mortgage applications rose 5.4% from the prior week, according to data from the Mortgage Bankers Association.
Last week, purchase applications increased for both conventional and FHA loans but remained 26% lower than the same week a year ago. Meanwhile, refinance applications also increased but are still about 30% lower than the same week last year.
“Mortgage applications increased last week, despite the 30-year fixed rate edging back up to 7.31%, its highest level in four weeks,” Joel Kan, MBA’s vice president and deputy chief economist said.
Also noteworthy, the average loan size on a purchase application was $416,800, the highest level in six weeks.
“Home prices in many markets have been supported by low inventory and resilient housing demand for available homes,” Kan added.
The refinance share of mortgage activity increased to 31.6% of total applications from 29.1% the previous week. Meanwhile, the adjustable-rate mortgage (ARM) share of activity decreased to 7.2% of total applications from 7.5% last week.
The 30-year fixed mortgage rate increased to 7.31% last week, according to Kan. At HousingWire’s Mortgage Rates Center, Optimal Blue had 30-year fixed-rate mortgage at 7.19% on Sunday. At Mortgage News Daily, 30-year fixed-rate mortgage rates were at 7.30% on Tuesday.
The Federal Housing Administration loans’ share remained unchanged at 14.2%. As homebuyers continue to face higher rates and limited for-sale inventory, purchase conditions are becoming more challenging for buyers. The U.S. Department of Veteran Affairs loans’ share decreased to 11% from 11.3% the week prior. Lastly, the U.S. Department of Agriculture loans’ share remained unchanged at 0.4%.
The average contract interest rate for 5/1 ARMs dropped to 6.42% from 6.59% a week prior.
The FOMC is expected to hold rates steady on Wednesday, though analysts believe one more rate hike remains in the cards this year.
Alterra Home Loans, a Nevada headquartered retail lender and a Panorama Mortgage Group company, has promoted Fernando Ospina to president.
Ospina, who has worked for the firm since 2018, formerly served as Alterra’s SVP of national production for the last year. He originated more than $46 million in loans in 2022, the company said.
Ospina will oversee the firm’s strategic direction, operational activities, and growth initiatives while ensuring Alterra provides accessible and tailored mortgage solutions to the Hispanic and underserved communities, the company said in a release.
“The industry is volatile today and requires a more unique leader who can navigate and adapt in the most difficult markets while also embracing innovation – such as Fernando’s efforts to help accelerate our operational center in Mexico, which has given us a competitive edge,” Jason Madiedo, co-founder and CEO of Panorama Mortgage Group, said in a statement.
Prior to Alterra Home Loans — where Ospina spent five years starting out as a branch manager in 2018 — he was a sales manager at Paramount Residential Mortgage Group and loan originator at MLB Residential Lending.
Panorama Mortgage Group — doing business as Alterra Home Loans — has 155 sponsored mortgage loan originators and 28 active branches across the country, according to the Nationwide Multistate Licensing System (NMLS).
The company originated $1.23 billion across 3,900 loans in 2022, data from mortgage data platform Modex showed.
Alterra, a minority-owned lender, is committed to helping consumers of all cultures attain financial security and create a better life for themselves and their children by achieving the American dream, the company said.