Frankly, however, the biggest surprise at the moment might be that sales volumes have held up pretty well over the past few weeks even as mortgage rates have climbed into the mid-7s. We’ve been talking about sales growth over the past year. More home sales are happening, but we can also see — once adjusted for seasonal patterns — that sales should be much higher now if a real market recovery were underway.
It feels like the latest macro trends will keep mortgage rates in the mid-7% range for the near term. And we’d expect that to slow home sales further. That’s why Altos Research tracks every home for sale in the country each week. The data so often defies expectations or changes very quickly. Let’s dig further into the details of the U.S. housing market for the week of April 22.
Housing inventory
When we look at the active inventory of unsold homes on the market, we can definitely see the impact of higher mortgage rates in the past month. There are 543,000 single-family homes on the market now. That’s a 3% jump from last week and 31% above year-ago levels.
The available inventory of unsold homes on the market is building quickly due to the most recent mortgage rate jumps. There are 130,000 more homes on the market now than last year at this time.
Normally, inventory is climbing at this point in the second quarter. We’re rapidly approaching the peak of the market in terms of seller listings, and as inventory builds, the sales rate will peak by the end of June. So, it’s normal that inventory is growing now.
But when you add a spike in mortgage rates that makes homebuying less affordable, that leads to fewer buyers and inventory grows. Altos data currently shows an inflection point in April. With the most recent mortgage rate jump, inventory growth has also accelerated.
This is what is meant when we say that higher rates leads to higher inventory. We are on the path back to the formerly normal levels of unsold homes on the market. A couple more years with elevated rates will get us there.
But it’s also noteworthy to point out that falling rates reverse this trend. Lower rates mean that people snap up the existing inventory.
New listings
Growing inventory is not just about slowing demand. We are also consistently measuring more sellers coming back into the market. At 69,000 new listings unsold today, that’s 3% more than a week ago and 14% more than this time last year.
In fact, there are more new sellers this week than in any week of 2023. This selling season still has two more months of growth potential. Industry professionals would love to see 70,000 or 80,000 new listings per week in May. More sellers means more sales can happen. There’s a limit, of course, as we could eventually reach an imbalance if too many sellers flood the market and too few buyers follow suit. But we’re not close to that yet.
In the years before the COVID-19 pandemic, the latter half of April would normally see 80,000 to 100,000 new listings in a week. Now we’re at 69,000. Obviously, elevated mortgage rates slows both buyer and seller activity. There are a lot of people who will never sell their house with a 3% mortgage.
There’s unlikely to be a flood of sellers in the next few years, but we can see steady growth. Each year with higher rates will create more inventory growth and have fewer people locked into low rates. That growth is good for the market.
The available inventory of homes to buy and the new ones being listed for sale each week are what consumers care about. If I’m buying a house, do I have any houses to buy? For homebuyers, the selection they have now is the most they’ve had in years.
Real estate professionals, on the other hand, have to care about transaction volume. How many home sales are happening? Because there were so few sellers last year, the number of sales was quite constricted. That’s starting to change. The 14% increase in new listings over the past year is a really good sign that sales can grow.
Pending sales
When we look at the sales rate, we can indeed see that home sales are growing. There were 71,000 new contracts started for single-family homes this week. That’s 3% more than last week and 7% more than a year ago.
There are still 8% fewer sales happening each week than in 2022. At that time two years ago, there were frantic last-minute deals getting done as mortgage rates were rising quickly. So, even though rates were up back then, sales were still strong.
But the hectic pandemic-era pace of sales had slowed, so inventory was building quickly. In 2022, the new sales rates really cratered after the Fourth of July holiday.
There are now 385,000 single-family homes under contract. That’s 5% growth compared to this time last year but is still 14% less than two years ago. New sales started this week saw 7% growth while the total number of homes under contract saw 5% growth.
It takes 30 to 40 days for the typical sale to close. The homes under contract now will mostly close in April and May. The 5% annualized growth rate is less than we’d hoped for at the start of the year, but it’s creeping up even with higher mortgage rates.
Altos Research uses direct measurement rather than seasonally adjusting its numbers. There are 385,000 single-family homes in escrow to complete a sale as of today. If you were to approximate a seasonal adjustment on this number, you would see a yearly sales pace of about 4.4 million units for April 2024. That pace is up from April 2023, but it is still running slower than the typical April. The seasonal pace is where one can observe the slowdown due higher mortgage rates.
The takeaway from the weekly new pending sales data is that even though sales continue to outpace last year, that growth has definitely slowed.
Home prices
The median price of single-family homes under contract is now $398,000. That jumped by 2.4% jump this week and is, in fact, a new all-time-high, surpassing the sale prices of two years ago.
These spring weeks are indeed the time when home prices climb, so it’s not too surprising that this trend is occurring now. But we’ve also been keeping a close eye on home prices in the face of these rising mortgage rates.
The prices of the homes going under contract are 6% more expensive than one year ago. Last year at this time, home prices were lower than in April 2022. But we’re now back at all-time highs. The previous peak was $395,000 two years ago.
One thing of interest in the price data is how slow this climb has been. Compared to Jan. 1, 2024, prices are up 6.6%. In most years, the increase is closer to 10% by this time in April. So, as a leading indicator for how the year ends up, this price signal is much softer than usual.
We can also see this in asking prices. The median price for all homes currently on the market is $449,000. That’s up a fraction from last week and only 1% above last year at this time.
Asking prices can be thought of as a leading indicator for future sales prices. Homes that are on the market now will get offers in May, close in June and will be reported on in July. So, the future signals for home prices aren’t falling because of higher mortgage rates, but it certainly looks like price appreciation has slowed.
Price reductions
Another strong leading indicator for future home sale prices is the share of homes on the market with price reductions. If more sellers have to cut their prices now, that’s a real signal for sales that will happen in the future.
Surprisingly, given the mortgage rate changes, there is no jump yet in the share of price reductions. We’ve been watching this stat closely.
This week, 32% of the homes on the market have taken a price cut. That’s actually down a fraction from last week, given a relatively strong set of new listings that hit the market and the fact that home sales are at their highest point of the year. Fresh inventory doesn’t take a price cut until after it sits for a while without an offer.
There are 3% more homes with price reductions today than a year ago. Last year at this time, price cuts were still decreasing with very tight volumes of new listings. There are more homes on the market now with price cuts than in any April on record. That shows weakness in prices, but it’s not a super high number and it’s not skyrocketing, so that implies we won’t see prices tanking anytime soon.
The takeaway here is that with the 30-year fixed mortgage at 7.4%, there is still just enough sales volume to keep home prices from dropping like they did in late 2022. The current market is not changing nearly that quickly. We’ll continue to watch data on price cuts. As mortgage rates make homes less affordable, fewer offers will be made and some sellers will cut their prices. That could accelerate in the next few weeks.
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The average rate on a 30-year fixed mortgage is 7.68%, and on a 15-year fixed-rate mortgage, it’s 6.94%. The average rate on a 30-year jumbo mortgage is 7.65%.
*Data accurate as of April 19, 2024, the latest data available.
30-year fixed mortgage rates
The average mortgage rate for 30-year fixed loans rose today to 7.68% from 7.59% last week, according to data from Curinos. This is up from last month’s 7.40% and up from a year ago when it was 5.92%.
At the current 30-year fixed rate, you’ll pay about $710 each month for every $100,000 you borrow — up from about $704 last week.
Ready to buy? Compare the best mortgage lenders.
15-year fixed mortgage rates
The mortgage rates for 15-year fixed loans inched up today to 6.94% from 6.82% last week. Today’s rate is up from last month’s 6.64% and up from a year ago when it was 5.33%.
At the current 15-year fixed rate, you’ll pay about $894 each month for every $100,000 you borrow, up from about $887 last week.
30-year jumbo mortgage rates
The mortgage rates for 30-year jumbo loans rose today to 7.65% from 7.32% last week. This is up from last month’s 7.24% and up from 5.77% last year.
At the current 30-year jumbo rate, you’ll pay around $707 each month for every $100,000 you borrow, up from about $703 last week.
Methodology
To determine average mortgage rates, Curinos uses a standardized set of parameters. For conventional mortgages, the calculations are based on an owner-occupied, one-unit property with a loan amount of $350,000. For jumbo mortgages, the loan amount is $766,550. These calculations assume an 80% loan-to-value ratio, a credit score of 740 or higher and a 60-day lock period.
Frequently asked questions (FAQs)
On May 3, 2023, the Federal Reserve announced a third interest rate hike for the year — this time by 25 basis points. While the Fed doesn’t set mortgage rates, this increase in the federal funds rate could lead individual lenders to raise their home loan rates, too.
If you already have a mortgage, how this could affect your monthly payment will depend on if your loan has a fixed or adjustable rate. A fixed rate stays the same over the life of the loan, meaning your payments will never change. An adjustable rate, however, can fluctuate according to market conditions — which means you could see a rise in your monthly payments.
For example, if you take out an ARM for $250,000 with an interest rate of 5.5%, your initial monthly payments would be $1,719. But after the initial period is over, and the ARM switches to a variable rate, your payments could increase if the rate rises. If the rate rose just 25 basis points (5.75%), for instance, your payments would increase to $1,750.
If you’re not planning on keeping a home for a long time, an ARM could be the better option — especially if fixed-rate loans have much higher rates at the time. This is because ARMs tend to have lower rates to start than fixed-rate mortgages, though your rate can increase over time.
While a fixed-rate loan will have the same rate throughout the entire term, an ARM will start with a fixed rate for a set amount of time and then switch to a variable rate that can change for the remainder of your loan term. For example, a 5/1 ARM will have a fixed rate for five years (the “5” in 5/1), then switch to a variable rate that can change once a year (the “1” in 5/1).
Whether a mortgage rate buydown is the right choice for you will depend on your individual circumstances and financial goals. If you plan to stay in the home for a long period of time and can afford to pay for the buydown, it could make sense. But if you know you’ll move or refinance your mortgage before you break even on the cost of the buydown versus the lower monthly payments, then buying down your rate might not be worth it.
Buying down your rate can be permanent or temporary, which will impact the overall cost. A permanent buydown is also known as purchasing mortgage discount points — for each point, you’ll typically pay 1% of the loan amount in return for 0.25% off your rate.
Temporary buydowns, on the other hand, will reduce your interest rate to a certain point, and it will then increase each year until you hit the original rate. Some common temporary options are 2-1 and 1-0 terms, with the first number being how much your rate is reduced in the first year and the second number being the reduction for the following year. Unlike discount points that are paid for by the buyer, this type of buydown can be paid for by the lender, seller or homebuilder.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
Jamie Young is Lead Editor of loans and mortgages at USA TODAY Blueprint. She has been writing and editing professionally for 12 years. Previously, she worked for Forbes Advisor, Credible, LendingTree, Student Loan Hero, and GOBankingRates. Her work has also appeared on some of the best-known media outlets including Yahoo, Fox Business, Time, CBS News, AOL, MSN, and more. Jamie is passionate about finance, technology, and the Oxford comma. In her free time, she likes to game, play with her two crazy cats (Detective Snoop and his girl Friday), and try to keep up with her ever-growing plant collection.
Megan Horner is editorial director at USA TODAY Blueprint. She has over 10 years of experience in online publishing, mostly focused on credit cards and banking. Previously, she was the head of publishing at Finder.com where she led the team to publish personal finance content on credit cards, banking, loans, mortgages and more. Prior to that, she was an editor at Credit Karma. Megan has been featured in CreditCards.com, American Banker, Lifehacker and news broadcasts across the country. She has a bachelor’s degree in English and editing.
Ashley is a USA TODAY Blueprint loans and mortgages deputy editor who has worked in the online finance space since 2017. She’s passionate about creating helpful content that makes complicated financial topics easy to understand. She has previously worked at Forbes Advisor, Credible, LendingTree and Student Loan Hero. Her work has appeared on Fox Business and Yahoo. Ashley is also an artist and massive horror fan who had her short story “The Box” produced by the award-winning NoSleep Podcast. In her free time, she likes to draw, play video games, and hang out with her black cats, Salem and Binx.
As thousands of Chicago-area families go house-hunting this spring, the dream of homeownership continues to drift further and further away.
By Don DeBat
21-Apr-24 – Average long-term mortgage rates inched above 7 percent nationwide for the first time this year, reported Freddie Mac’s Primary Mortgage Market Survey on April 18.
Benchmark 30-year fixed-rate home loan rates hit 7.10 percent, up from 6.88 percent a week earlier. That’s its highest level since October 26, 2023, when 30-year fixed loans hit 7.79 percent. A year ago, 30-year fixed mortgage rates averaged a more affordable 6.39 percent.
“The 30-year fixed-rate mortgage surpassed 7 percent for the first time this year,” said Sam Khater (left), Freddie Mac’s Chief Economist. “As rates trend higher, potential home buyers are deciding whether to buy before rates rise even more or hold off in hopes of decreases later in the year.”
Interest charges on 15-year fixed loans on April 18 averaged 6.39 percent, up from 6.16 percent a week earlier. A year ago, 15-year fixed mortgages averaged 5.76 percent.
Khater noted that home purchase applications rose modestly the week before, but “it remains unclear how many home buyers can withstand increasing rates in the future.”
The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place a down payment of 20 percent and have an excellent credit score of 740 or higher.
The truth is home buyers in Chicago and across the nation really are starting to get rate-shy. Sales of existing homes in the United States fell 4.3 percent in March to a seasonally adjusted 4.19 million, reported the National Association of Realtors (NAR). That’s the first monthly decline in sales since December 2023, and follows a nearly 10 percent monthly sales jump nationwide in February.
“Home sales essentially remain stuck because mortgage rates have been stable and inventory is not really rising,” said Laurence Yun (right), NAR’s Chief Economist.
Unfortunately, Yun predicted that mortgage rates are likely to rise above 7 percent in the coming weeks. Early in 2024, Yun had predicted that 30-year fixed loan rates would average 6.3 percent by the fourth quarter of this year.
The interest rate rise is a direct result of the Federal Reserve’s aggressive interest rate hikes intended to tame soaring inflation numbers not seen in 40 years.
The Fed has raised its key benchmark lending rate to a range of 5.25 to 5.50 percent, the highest level since 2007. Based on moves by the Fed, mortgage analysts say 30-year fixed home loans could reach – or surpass – the 8 percent level in the near future. Home loan rates have not hit the lofty 8 percent level since August 11, 2000, more than 23 years ago.
Searching for a better deal, some borrowers are beginning to flock to riskier adjustable-rate mortgages (ARM), lenders say.
“This week we have issued 30-year loan commitments with rates as high as 7.5 percent, depending on down payments and borrower credit scores,” said Jeremy Rose (left), Chicago-based loan consultant for Loan Depot, one of the largest lenders in the nation. “Mortgage interest rates may have gradually declined over the past two decades, but home prices have tripled.”
Today, the buyer of a $400,000 home with a credit score of 740, who places a 25 percent down payment and takes out a $300,000 mortgage for 30 years at Loan Depot, would pay a rate of 7.5 percent. If the buyer is willing to pay a 1 percent discount point, or a loan fee of $3,000, the interest rate would drop to 7.125 percent.
“The most motivated buyers will accept the current level of mortgage rates and make offers when they find a place that’s suitable,” said Holden Lewis (right), a home and mortgage expert at Nerd Wallet. “High mortgage rates aren’t holding buyers back as much as lack of inventory and high prices.”
“If you’re always waiting for the perfect market conditions to arise, you could end up missing out on a lot of great opportunities,” warned Jacob Channel, Senior Economist at Lending Tree.
Mortgage rate history
Thirty-year fixed-mortgage interest rates ended 2020 at a rock-bottom 2.65 percent – the lowest level in the Freddie Mac survey history, which began in 1971.
Home loan rates set new record lows an amazing 16 times in 2020, and tens of thousands of homeowners refinanced.
Archives of the now-defunct Federal Housing Finance Board show long-term mortgage rates in the 1960s were not much higher than the Great Depression, when lenders were charging 5 percent on five-year balloon loans.
Nearly six decades ago, between 1963 and 1965, you could get a mortgage at 5.81 to 5.94 percent. Between 1971 and 1977, the now-defunct Illinois Usury Law held rates in the 7.6-to-9 percent range.
In the early 1980s, runaway inflation caused home loan rates to skyrocket into the stratosphere. According to Freddie Mac, benchmark 30-year mortgage rates peaked at a jaw-dropping 18.45 percent in October 1981 during that Great Recession.
Rates finally fell below 10 percent in April 1986, and then bounced in the 9-to-10 percent range during the balance of the 1980s. Twenty-three years ago, in August 2000, when some of today’s Millennial borrowers were still in diapers, lenders were quoting 8.04 percent.
(Left) October 1981 issue of Inc. magazine
Between 2002 and 2011, rates bounced in the 4-to-6 percent range. They inched into the 3-to-4 percent range until 2020, when they fell into the rock-bottom 2 percent bracket.
Buying your first home can be tedious and overwhelming.
While it’s exciting to visit properties and daydream about your dream home, getting over the financing hurdles is another story. But don’t fret.
This comprehensive guide for first-time homebuyers will walk you through the entire process from start to finish.
Benefits of Being a First-Time Homebuyer
As a first-time homebuyer, you may feel a mix of excitement and apprehension. While the home buying process can seem overwhelming, it’s important to recognize the numerous benefits that come with this milestone.
Financial Assistance
First-time homebuyers have access to several financial assistance programs that can make homeownership more affordable. These include down payment assistance programs, low-interest mortgage loans, and grants specifically designed for first-time buyers. Some of these programs are offered by state and local governments, while others are provided by non-profit organizations or private lenders.
Lower Down Payments
Several loan programs offer lower down payment requirements for first-time homebuyers. The FHA loan, for example, requires as little as 3.5% down if your credit score is 580 or higher. The USDA and VA loans even offer zero down payment options in some cases.
Access to Educational Resources
There’s a lot to learn when you’re buying a home for the first time, but fortunately, there are plenty of resources available. Many organizations offer homebuyer education courses that can help you understand the process and make informed decisions. Some lenders and assistance programs require you to take one of these courses, but even if it’s not mandatory, it can still be a valuable resource.
Before Starting Your Home Search
Check Your Credit
Not only will your credit score play a considerable factor in whether you’re approved for a mortgage, but it will also determine your interest rate.
A small increase or decrease in interest rates may not seem like a big deal. However, mortgage loans are for a hefty sum and for an extended period of time. So, a slight increase or decrease equates to thousands of dollars more spent or saved over the life of the loan.
To have the best chance of being approved for a home loan, you should aim for a credit score of at least 620. It’s possible to get approved for select home loan programs with a score as low as 580, but you may have fewer lenders to choose from.
Run the Numbers
It’s tempting for first-time homebuyers to start searching for homes when they know their credit score is up to par. But that’s probably not a good move until you determine how much home you can afford. Yes, the loan officer will give you a figure when you obtain a preapproval, but that amount isn’t always indicative of what you can afford.
Why so? Well, they focus on the debt-to-income (DTI) ratio to get an idea of a loan amount you qualify for. According to the Consumer Financial Protection Bureau, lenders prefer a DTI ratio of 43% or lower with your new mortgage payment. To illustrate:
CURRENT MONTHLY DEBT
GROSS INCOME
DEBT-TO-INCOME RATIO
MAXIMUM MORTGAGE PAYMENT (USING 43% RECOMMENDATION)
$1,000
$4,000
25%
$720
$2,000
$6,000
33%
$580
$3,000
$10,000
30%
$1,300
Note: Debt-to-Income Ratio = Aggregate Amount of Monthly Debt / Gross Income
The problem is that it fails to consider any expenses unrelated to debt. And if you have hefty insurance, childcare, or even grocery bills, that could be a major concern.
So, your best bet is to look at your current budget and come up with a realistic figure for your new mortgage payment. But don’t forget to keep the recommended DTI ratio in mind.
Explore Mortgage Options
There are several mortgage options on the market for first-time homebuyers, but the most prevalent are:
Conventional Loans
A conventional mortgage is a type of home loan that is not insured or guaranteed by the government. It’s typically offered by a private lender, such as a bank or credit union, and is the most common type of mortgage used to purchase a home.
Conventional mortgages typically require a down payment of at least 3% of the purchase price of the home. Borrowers typically must have a credit score of 620 or higher and a DTI ratio of 36% or lower to qualify. If you have bad credit or are unable to make a large down payment may have a harder time qualifying for a conventional mortgage.
If the loan amount is over $726,200, it becomes a jumbo loan and requires a higher down payment.
FHA Loans
An FHA loan is a type of home loan insured by the Federal Housing Administration (FHA), a government agency within the U.S. Department of Housing and Urban Development (HUD).
FHA loans are designed to make it easier for people to buy homes, especially for first-time homebuyers. They offer lower down payment requirements and more flexible credit guidelines than conventional mortgages.
The minimum credit score required for an FHA loan is 500. If your credit score is between 500 -579, the down payment is 10%. However, if you have a credit score of 580 or above, the down payment is 3.5% of the purchase price.
VA Loans
VA Loans are insured by the Department of Veterans Affairs. They don’t require a down payment and are easier to qualify for than conventional loan products. However, you must be an active-duty member of the armed forces. Surviving spouses also qualify.
USDA Loans
A USDA loan is a type of mortgage offered by the U.S. Department of Agriculture (USDA) to low- and moderate-income borrowers who are looking to buy a home in a rural or suburban area.
See also: 14 First-Time Home Buyer Grants and Programs
Check Out Our Top Picks for 2024:
Best Mortgage Lenders
Most mortgages have a 30 or 15-year term. The latter will cost you more per month, but you’ll save a load of cash on interest.
You can also choose from a fixed or adjustable-rate mortgage (ARM). Fixed-rate mortgages have the same interest rate for the duration of the loan. But ARMs typically start with a lower interest rate for a set amount of time. In fact, they usually span from five to ten years and then adjust depending on the housing market.
Some first-time homebuyers choose ARMs over fixed-rate mortgages because it gives them the option to make a smaller monthly payment in the first few years. It could also mean that you can qualify for a more expensive home. But, be careful not to get too overextended, as erratic market behavior could cause the rate to skyrocket.
Get Preapproved
This is one of the more time-consuming parts of the entire mortgage process for a first-time home buyer. The good news is you don’t have to settle for the first offer that comes your way out of fear that your credit score will take a hit.
“FICO Scores ignore [mortgage] inquiries made in the 30 days prior to scoring,” according to myFICO. So, you won’t be penalized for multiple inquiries.
So, start by researching mortgage lenders that you may be interested in working with. You could also solicit the help of a mortgage broker if you’re strapped for time or want someone to do the legwork for you.
Once you’ve settled on a few lenders, be prepared to provide the following to get preapproved:
Financial statements to confirm your assets, including retirement accounts and real estate
Recent bank statements
Last two pay stubs
W-2s from the last two years
They will also pull your credit report and credit scores. If you qualify, the mortgage lender will then provide you with a preapproval letter, valid for a certain time period, that specifies how much you’re eligible for.
Save Up for a Down Payment and Closing Costs
During the preapproval process, the lender should have discussed loan options that could be a good fit for you. They should also have communicated how much you will need for a down payment and closing costs.
While some sellers may be willing to cover closing costs, be prepared to provide earnest money to secure your offer. And you may need a large down payment if you’re taking out a jumbo loan, or don’t qualify for the FHA or VA loan program. If that’s the case, now’s the time to figure out a plan for it.
If the seller is not paying closing costs, expect to pay between 2% and 5% of the sales price. And if a hefty down payment isn’t required, it’s not a bad idea to bring money to the table. Doing so allows you to reduce the Loan-to-Value, which positions you as less risky to the lender.
You may also be able to avoid private mortgage insurance (PMI), which is required until you reach 20% in equity, and possibly qualify for a reduced interest rate.
How to Find the Perfect Home
Go Home Shopping
All squared away with a preapproval and planned to save up the cash you need? Now, it’s time to go home shopping. But before you go, you have to decide if you want to enlist the assistance of a real estate agent.
It’s possible to find a slew of listings within your price range on the web with minimal effort. However, real estate agents have access to a system that could expand your reach. Even better, they could be integral in helping you choose a home that’s a good buy and negotiating the final purchase price.
And the seller’s agent pays their commission, so no need to worry about forking over extra cash. Just be sure to hire a real estate professional that is seasoned and reputable.
Now for the fun part: home shopping. Be careful not to judge a home solely by its appearance. Some other important factors to keep in mind:
Taxes: are the property taxes affordable or beyond what you can comfortably afford? (You can roll property taxes and homeowners insurance into an escrow account, but they can easily make or break your budget if the figures are steep).
Location: is the home in an area that has historically held its value? Is the location optimal for your commute to and from work?
Crime: is it a high crime area or is it relatively safe?
Condition: how old is the property? Does it need tons of repairs, or is it close to being move in ready?
Floor plan: is the floor plan feasible or ideal for your situation? Would it be appealing to other buyers if you had to sell?
School district: how are the schools? Have they received a good rating, or do they struggle to stay afloat?
All of these factors can have an effect on the value of the property over time.
Submit an Offer
You’ve found the perfect home, and you’re ready to sign on the dotted. Before you can finalize the paperwork and move in, there’s one more important step. And that’s making the offer. Even if the sales price seems fair, you may need to make an offer that’s higher or lower to snag the home.
Why so? Well, there could be a slight or drastic bidding war going on, and the only way for you to win is to beat out the competition. Or maybe your real estate agent did some research and determined the asking price was a bit high based on similar properties in the area or the home’s current condition.
Either way, you want to submit an offer that stands out and gets accepted. Your real estate agent will be able to do so on your behalf. But if you don’t have a real estate agent, check out these letters from Trulia to get you started.
The Mortgage Process
Even after your offer is accepted, there’s still more work to do. You’re not done just yet! It’s time to move on to the mortgage process.
Remember that preapproval letter? The lender will make sure all the information you initially provided is accurate through a process called underwriting.
Depending on how long it’s been since you were preapproved, you may be asked to provide updated bank statements or pay stubs.
The faster you submit the requested information, the quicker you’ll get a response. So, don’t drag your feet if you want a closing date that’s sooner than later.
Home Inspections and Appraisals
Before you close on the home, you will need to have a home inspection and appraisal complete.
The home inspection shouldn’t cost you more than $500. It will give you an overall assessment of the property and identify any potential issues.
The appraisal also plays an integral role as it will give you a solid idea of the home’s fair market value. The lender will mandate it, but it’s not a bad idea to get an independent appraisal done to serve as a second opinion.
An inspection and appraisal may help you decide if you should lower your offer or walk away from the property.
Purchase Homeowners Insurance
Your mortgage lender will require that you take out homeowners insurance. So, you want to start shopping around for quotes and select a policy prior to closing.
Close on Your Loan
At last! You’ve reached the finish line, and it’s time to close on your loan. During the closing, expect to:
Sign a load of paperwork.
Provide any amounts owed for the down payment.
Pay closing costs, which could include property tax obligations, premiums for homeowner’s insurance and association dues, title insurance, and any other costs associated with finalizing the loan.
Pay discount points or prepaid interest that can reduce the interest rate.
But before you show up at closing, it’s a good idea to speak with the lender, so you’ll know what to expect. You can also request a copy of the final closing document, or Closing Disclosure, to see a detailed breakdown of expenses.
A Few More Tips
Here are a few more suggestions for first time home buyers to help you get approved for your first loan:
Refrain from applying for new credit before you close. This could throw off your DTI ratio, lower your credit score, and ultimately prevent you from closing on the loan.
State and local programs may be available to assist with down payments. If you’re low on funds, be sure to explore options that may be available to you.
Several builders offer buyer incentives, like allowances for upgrades and closing costs. So if you haven’t considered new construction, it may not be such a bad idea to take a look if the price points are within your budget.
Should You Rent, Instead?
Perhaps you’ve done a little legwork, ran the numbers, and are on the fence about home buying. You will typically find that it’s cheaper to make monthly mortgage payments than to pay rent.
You can also take advantage of tax deductions and build up equity as you’re making monthly payments. The equity can be borrowed against for a loan or put some extra money in your pocket should you decide to sell before the repayment period ends.
However, renting a home gives you the flexibility to move to a new location if the home isn’t quite what you expected, don’t like the neighborhood, or want something more affordable.
Furthermore, renting allows you to pass the costs of maintaining the home on to the owner. But as a homeowner, you’ll be responsible for costs associated with maintenance and repairs.
Another reason why some choose to rent over buying is the upfront costs. Most landlords require a security deposit. However, it could be substantially lower than the money you may have to bring to the table for the down payment and closing costs.
Ultimately, you have to decide which is the better fit: investing in an asset that could build wealth or continuing to pay rent until you feel the time is right. There is no right or wrong answer; it just depends on your personal preference and financial situation.
Bottom Line
By taking the time to learn about the home buying process, you’ll be well-prepared and save yourself time and headaches. Best of all, you’ll increase your chances of landing your dream home with the most competitive mortgage product on the market.
Frequently Asked Questions
What is the process for buying a home?
The process for buying a home typically involves the following steps:
Determine your budget and get preapproved for a mortgage.
Find a real estate agent and start looking for homes.
Make an offer on a home and negotiate the terms.
Get a home inspection and address any issues that are found.
Get a mortgage and close on the home.
How much house can I afford?
When determining how much house you can afford, there are several factors to take into account. You should consider your income, expenses, down payment, credit score, and mortgage type before making a decision.
A larger down payment can help you get a lower mortgage rate, and a higher credit score can qualify you for better rates and loan terms. Shopping around for mortgage rates and considering different types of mortgages, such as fixed-rate or adjustable-rate, can also help you find the best deal.
Keep in mind that owning a home involves more than just the monthly payments. You will also need to factor in property taxes, insurance, and maintenance costs. You should create a budget that includes all of these costs and leaves room for unexpected expenses.
How much money do I need for a down payment?
The amount of money you need for a down payment will depend on the type of mortgage you get and the price of the home you are buying.
Some mortgage programs, such as FHA loans, allow for down payments as low as 3.5%, while others may require a higher down payment. It’s a good idea to speak with a mortgage lender to determine how much you will need.
Can I buy a house if I have a low credit score?
It’s possible to buy a house with a low credit score. However, it may be more difficult to get approved for a mortgage, and you may have to pay a higher interest rate. Before applying for a mortgage, work on improving your credit scores, as this will help you qualify for a better loan and save you money over time.
How much will closing costs be?
Closing costs are fees that are paid at the closing of a real estate transaction. These costs can vary widely and may include things like mortgage origination fees, title insurance, and appraisal fees. On average, closing costs can range from 2% to 5% of the purchase price of the home.
What is a mortgage preapproval?
A mortgage preapproval is a letter from a lender that indicates how much you are qualified to borrow for a mortgage. The preapproval letter is based on a review of your financial information, including your credit score, monthly income, and debts. A mortgage preapproval can help you understand how much you can afford to borrow and can make you a more competitive buyer in the real estate market.
What is a mortgage rate?
A mortgage rate is the interest rate that you will pay on your mortgage. The mortgage rate will determine the amount of your monthly payments and the overall cost of your loan. Interest rates can vary depending on the type of mortgage you get and your credit scores.
What is PMI?
PMI, or private mortgage insurance, is insurance that is required by lenders for certain types of mortgages when the borrower has less than a 20% down payment. PMI protects the lender in the event that the borrower defaults on the mortgage. The cost of PMI is typically added to the borrower’s monthly mortgage payment.
Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
Home equity loan
Home equity line of credit (HELOC)
Interest rate
Fixed
Variable
Monthly payment amount
Fixed
Variable
Closing costs and fees
Yes
Yes, might be lower than other loan types
Repayment period
Typically 5-30 years
Typically 10-20 years
FAQ
What is a rate lock?
Interest rates on mortgages fluctuate all the time, but a rate lock allows you to lock in your current rate for a set amount of time. This ensures you get the rate you want as you complete the homebuying process.
What are mortgage points?
Mortgage points are a type of prepaid interest that you can pay upfront — often as part of your closing costs — for a lower overall interest rate. This can lower your APR and monthly payments.
What are closing costs?
Closing costs are the fees you, as the buyer, need to pay before getting a loan. Common fees include attorney fees, home appraisal fees, origination fees, and application fees.
If you’re trying to find the right mortgage rate, consider using Credible. You can use Credible’s free online tool to easily compare multiple lenders and see prequalified rates in just a few minutes.
Getting the most money possible when selling your car isn’t as difficult as it once was. The internet allows you to reach a wider audience and increase your odds of finding a buyer willing to pay more — whether selling to an individual, online-only auto retailer or traditional dealership.
When choosing where to sell your car, the decision comes down to whether your top priority is convenience and speed or getting the highest sales price. If your main objective is getting the most money, expect to spend a little more time in your endeavor.
Here are steps to help you get the most money for your car, from prepping for the sale to selecting the best sales platform.
Preparing to sell your car
Before presenting your car for sale, there are some preliminary steps to take. These can vary depending on where and how you intend to sell it.
Know your car’s fair market value
Regardless of where you sell your car, research what dollar amount you can realistically expect to receive. Online valuation sites like Edmunds or Kelley Blue Book show average prices paid to buy a vehicle like yours from individual sellers or dealerships in your area. Providing your vehicle identification number (VIN) or license plate number, as opposed to just entering the make and model, will give you a more accurate value.
Have a price range that you’ll accept in mind. That way you can be prepared to set your asking price at the high end if you create your own listing. And, you’ll know a realistic bottom line if a potential buyer wants to negotiate or a dealership makes you an offer.
Invest time to present your car in its best light
Clean your car inside and out, and have this done professionally if possible to remove any odors or stains. You may also want to clean the engine bay and make any minor repairs, such as restoring cloudy headlights. Your car’s appearance can be very important in convincing a potential buyer (or dealer) that the vehicle is well-maintained and worth more.
Also, gather maintenance records as proof that your car has been taken care of and is less likely to have mechanical problems.
Create a detailed description of your car
This step is needed only if you plan to list your car on sites that sell to private parties. Write a description that shows and tells potential buyers why your car is worth the price you’re asking. Take quality photos from all angles, and write a description highlighting selling points like low mileage, upgrades or any remaining transferable warranty.
Choosing where to sell your car
A lot has changed since the days of selling your car by putting a “for sale” sign in its window, a flyer in the supermarket or a classified ad in the local newspaper. While those are still options, you have a wide range of other possibilities available, too.
Here we focus on the three main avenues for selling a car — selling to an individual, to an online-only retailer or to a traditional dealership. Some websites enable you to use more than one approach, for example getting both private party and dealer offers for your car.
We’ll start with the option that typically results in car sellers receiving the highest prices.
Sell your car to an individual or private party
Selling your car to an individual, also called a private-party sale, is typically where you can get the most money. However, it can also be more time-consuming and come with added risk.
You can use traditional ways of letting people know your car is available, like word of mouth. But you can reach a bigger audience by listing your car on online private sales sites — like Facebook Marketplace, Craigslist, Autotrader or eBay Motors.
While you can make the most selling your car privately, that amount could be reduced slightly by certain expenses. Some private sale sites let you list a car for free while others charge a fee, so consider what you’ll be paying. For example, Autotrader charges $49 for a listing, but this fee also includes a Kelley Blue Book listing and a free vehicle history report for possible buyers. Remember to take into account whether you could have travel or transport expenses to get your car to someone who doesn’t live near you.
Also, be wary of scams when selling your car to an individual, which could be the difference between receiving the most money for your car or not receiving payment at all. Scammers can fake just about every form of payment — including cash, cashier’s checks and certified checks. If your buyer is local, you could meet at that person’s bank to ensure the cash or check is legitimate.
If the buyer isn’t local, using an escrow company — a third party that holds your car title until payment is confirmed — is a good option. But beware that escrow companies can be fake, too. To avoid escrow fraud, don’t use a company suggested by the buyer. Take time to identify a legitimate escrow service, such as a local bank or attorney, or a well-known online service. AutoTrader offers escrow services when you sell through its site, but expect to pay the greater of $49 or 0.99% of the car’s selling price.
Sell to an online used car retailer
Selling your car directly to an online-only car retailer, like CarMax, Carvana or NerdWallet’s own Automotive Marketplace, provides a middle ground. The nonnegotiable offer you receive is likely to be less than what you could get from an individual buyer. However, it’s typically quite a bit more than you would get from a traditional dealership.
Online auto retailers provide an easy way to submit your vehicle information online, receive an immediate offer and in some cases even have your car picked up. At pick-up, you’ll most likely have a check handed to you, or you may receive payment into your bank account via direct deposit or wire transfer. You won’t have to worry about scammers or a possibly drawn-out process of fielding inquiries from strangers.
Online retailers do have vehicle requirements. For example, Carvana only buys cars that are model year 1992 or newer, have a working odometer and are safe to drive. However, if your vehicle doesn’t meet such requirements, you may have options to sell to companies like Peddle and NerdWallet Automotive Marketplace that accept older and damaged vehicles.
Sell to a traditional car dealership
Selling your car to a nearby used car lot may be convenient, but it’s usually where you’ll get the least amount of money. Brick-and-mortar dealerships have overhead business expenses that individuals and online retailers don’t, so dealer offers are commonly the least competitive.
Occasionally a dealer might beat other offers, especially if you’re selling an in-demand car that the dealer needs in inventory, but that isn’t the norm. And, it’s up to you to provide other, higher offers for the dealer to beat.
One way to do this is to get offers from online-only retailers, then ask the traditional dealership if it can do better. Another option is to get and compare offers from many dealers through companies like Cars.com, CarGurus and TrueCar, where you can request bids from local dealers or a network of dealerships.
🤓Nerdy Tip
If you’re buying a car from a dealer and trading in your old one, expect the trade-in value to be less than what you could get selling the car yourself. But you may pay less in taxes, since most states charge sales tax on the difference between the trade-in value and new-car price.
Getting more offers can mean more money
Whether you decide to sell your car privately, through an online retailer or at a local dealership — or in some combination of the three — it’s a good idea to cast a wide net. Unless you’re paying to list on a private sale site, it won’t cost you anything to seek offers from multiple sources.
For example, offers from sites like CarMax and Carvana can vary by thousands of dollars, and one doesn’t consistently pay more than the other. So why not get offers from both, along with several other sites? It’s a small investment of time to find the highest offer and make the most possible when selling your car.
It’s the season of new beginnings and fresh starts: Spring cleaning, the outdoors, weddings, gardening and… real estate.
But in a housing market marked by high mortgage rates, low housing inventory and steep home prices, we still haven’t seen a typical spring homebuying season.
Though mortgage application volume is higher than it was last fall when home loan rates peaked above 8%, it’s still 10% lower than it was last year.
As temperatures go up in 2024, experts anticipate a somewhat healthier spring market, with inventory and home listings growing. So far, however, it hasn’t been such a great kickoff: In April, the average rate for a 30-year fixed mortgage pushed back above 7% in response to hot inflation data.
But context is critical, according to Logan Mohtashami, lead analyst at HousingWire. “Last year was the all-time low in new listings data,” he said.
Here’s a look at how the spring market is shaping up and what buyers can do to navigate it successfully.
Why is spring the season to buy and sell a home?
There are several reasons behind the rush of home listings and sales in the springtime and early summer months, according to Jeb Smith, realtor and CNET Money Expert Review Board member.
Warmer weather: Better temperatures and more sunlight make it easier for buyers to go out, tour and inspect properties compared with the winter months.
Timing with academic calendar: Families start the buying process so they can be settled into a new home before the start of their child’s school year in the fall.
Greater inventory: With sellers motivated to sell due to an influx of motivated buyers, increased supply hits the market.
Favorable to buyers and sellers: Buyers know there will be more choices available to them, and sellers take advantage of demand to list their homes at higher prices.
Why is today’s spring market different?
Beyond seasonal trends, the housing market is highly sensitive to broader economic shifts. Over the past two years, high inflation and surging mortgage rates have done significant damage to affordability for the average homebuyer.
From May 2019 to May 2023, average mortgage rates increased by more than 2%, causing a roughly 25% drop in home sales, according to data from Redfin. Homeowners who are currently “locked in” with low home loan rates have less incentive to sell, which keeps prospective buyers “locked out.”
Meanwhile, many prospective buyers are priced out of the market. According to Zillow, the monthly mortgage payment on a typical US home has almost doubled since January 2020. The average income needed to afford a home is now more than $106,500 — an 80% increase over four years — while the typical US household earns around $81,000 each year.
High mortgage rates also negatively impact existing housing inventory, said Daryl Fairweather, chief economist at Redfin. Because most sellers are also buyers, homeowners would rather hold onto their sub-5% mortgage rates than take out a new home loan at a 7% rate.
This “rate-lock” scenario — with sellers reluctant to give up their existing mortgage — is starting to loosen, according to Orphe Divounguy, senior economist at Zillow Home Loans. Homeowners have accrued substantial equity over the last period and are more motivated to cash in on it. “Any who were waiting for rates to fall have likely given up,” Divounguy said.
Who has the upper hand this season? Buyers or sellers?
Shrinking housing supply over the past several years has given sellers the upper hand. After all, you can’t buy what’s not for sale.
“In most areas of the country, we still have more buyer demand than inventory, which is typically indicative of a seller’s market,” Smith said. Because of that imbalance, many housing markets continue to be very competitive with multiple offers on homes, he said.
Yet in some areas where supply has returned to pre-pandemic levels, buyers have more of the upper hand. Divounguy said that in markets where new construction has taken off and existing inventory has recovered, price growth is slower, giving buyers better traction in negotiations.
Generally speaking, however, housing supply is still too low. “Even with home sales still trending at record-low levels, we have too many people chasing too few homes,” Mohtashami said.
In a buyer’s market, there’s a surplus of homes for sale and not enough buyers. Buyers have more options and leverage to negotiate lower prices or other concessions from sellers.
In a seller’s market, demand for homes exceeds supply. With more buyers ready to make offers on fewer homes, sellers are at an advantage and asking prices are generally higher.
If mortgage rates were to drop significantly, we’d likely see a substantial uptick in buyer and seller activity. However, 6% mortgage rates are still several months away, keeping a lid on the number of new listings this spring.
At the same time, homeseekers who need to relocate — or those getting tired of waiting on the sidelines — are starting to adjust to the new normal. Many families can’t put their lives on hold forever, and another era of sub-3% mortgage rates isn’t on the horizon.
“Buyers seem to now be accepting this higher-rate environment and are getting back into the market,” said Melissa Cohn, regional vice president at William Raveis Mortgage. Many of them know they have the option to refinance to a lower rate when mortgage rates eventually come down, she said.
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How does low inventory affect home prices?
In February, new listings increased 14.8% from the prior year, the largest annual gain since May 2021, according to Redfin. Currently, there are about 25% more available homes for sale compared with 2023, adding up to around 100,000 extra single-family homes on the market, Smith said. But again, context is critical.
“Even with this increase, the number of homes for sale is still much lower than what we saw before the pandemic hit, indicating we’re not yet back to a ‘normal’ market,” Smith said.
With buyer demand outweighing existing supply, home prices continue to go up. In February, the median sale price was $412,778, which is 6.6% higher than the previous year.
Should you sit it out this homebuying season?
Ultimately, the right time to buy a house depends on your finances, goals and timeline. The housing market has its patterns and fluctuations, but that doesn’t mean it has to dictate what works for you.
If you find a home that meets your needs and aligns with your budget, go for it. You can always refinance to a lower mortgage rate later.
But if you decide to delay buying a house, you can take steps toward having a more solid foundation as a future homeowner. By waiting, you’re giving yourself time to save for a bigger down payment, improve your credit and be in an overall better position to purchase a house, even if it’s not for several spring seasons down the road.
Editor’s Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.
Forex options, also called currency options, are contracts that give the purchaser the option to buy foreign currency from the exchange at a specific price on or before a specific date.
Like stock options, there are two different types of forex options: A call option gives the holder the right to buy currency at a specified price (the strike price), while the holder of a put option has the right to sell a currency at a predetermined price.
Those investing in foreign countries may use forex options as a way to hedge against unfavorable fluctuations of foreign currencies or to speculate on volatility.
What Is Forex Options Trading?
Like options in the stock market, currency options are a derivative instrument. In this case, the underlying asset is a foreign currency pair. Currencies (also known as FX or forex) are generally traded in pairs. One major currency pair, for example, is EUR/USD, which indicates the value of the euro against the U.S. dollar.
Foreign currency options are a way to invest in foreign currency markets without trading in the actual currencies themselves. 💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.
How Forex Options Trading Works
If you understand how to trade options in the stock market, currency options work in a similar manner. Buying a currency call option gives you the right (but not the obligation) to purchase a particular foreign currency at a specified price (the strike price) at any time before its expiration date.
A currency put option works in a similar way, except that the buyer has the right (but not the obligation) to sell a currency at a given price before the expiration of the option.
You can also purchase combinations of both put and call options at different strike prices and/or different expiration dates, depending on how you think the market will move. You can always close out your position before the options expire. Owning options gives you exposure to movements in the exchange rate without having to actually purchase the currency.
Types of Forex Options Available
The most basic currency options come in two types: so-called ‘vanilla’ calls and puts.
Vanilla Call and Put Options
A forex call option gives the holder the right (but not the obligation) to purchase a given currency at a specific price, any time on or before the option’s expiration date. You would generally buy a forex call option if you have a bullish outlook on a particular currency.
A forex put option works in the opposite manner. If you hold a put option, you have the right (but not the obligation) to sell a specific currency at a particular price before the options expire.
Purchasing a put option is something that you would do if you have a bearish outlook on the underlying currency.
SPOT Options
Another type of currency option is single payment options trading (SPOT). With a SPOT option, an investor and broker can set more detailed conditions for the option to pay out. These conditions are either met, or not. Because there are only two possible outcomes upon the option expiring, these options are sometimes called binary currency options.
Example of Trading Forex Options
If an investor expects the value of a currency will fall, they may choose to buy a put option to earn the right (but not the obligation) to sell the currency in question at a predetermined price during a set timeframe.
For example, if a U.S. investor expects the euro will fall in value against the U.S. dollar, they may buy a EUR/USD put option. Essentially, the option can help the option holder protect themselves against depreciation of a given currency. 💡 Quick Tip: Options can be a cost-efficient way to place certain trades, because you typically purchase options contracts, not the underlying security. That said, options trading can be risky, and best done by those who are not entirely new to investing.
Benefits and Risks of Forex Options Trading
Here are some of the pros and cons of trading forex options:
Benefits
Using forex options can be a cost effective way to potentially help hedge an investors’ portfolio against currency risk. For example, an investor who owns foreign stocks may consider investing in local currencies via options to reduce currency risk. Investors may want to weigh the option’s premium, as well as risk against possible outcomes.
Risks
Like any investment, trading currency options comes with a set of risks. Options are complex, high-risk instruments that require investors to understand how they work.
Currency values may fluctuate based on macroeconomic events, economic data, or political events. This means that FX options investors must bear in mind the risk profile of particular countries, as well as that of their own portfolio. Because currencies react to interest rates, trading currency options also bears interest rate risk. Traders who use leverage to potentially earn higher profits with less money, also risk losing more than their initial investment.
Benefits
Risks
Using forex options is a low-cost way to potentially hedge against adverse currency moves.
The price of currencies can be extremely volatile.
Using leverage, there is the potential for higher profits with less money invested.
Political risk as currency markets react to local governments’ policies.
You have many different ways to trade depending on your market outlook.
Options may be less liquid than the currencies themselves.
The Takeaway
Trading forex options can be a way for you to invest in the foreign currency market without actually owning the currency itself. You can use call options, put options, or a combination based on how you think the market will perform.
Qualified investors who are ready to try their hand at options trading, despite the risks involved, might consider checking out SoFi’s options trading platform. The platform’s user-friendly design allows investors to trade through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.
Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors.
For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
FAQ
What are some types of forex options?
The two kinds of forex options are call options and put options. A call option allows the holder to buy the specified currency at a given strike price, while a put option allows the holder to sell a given currency at a particular price. There are also SPOT, or binary currency options.
What is a forex call option?
A forex call option allows the holder to buy a specific currency at a specific price, on or before the expiration date.
How are forex options settled?
If you hold a currency option that is in the money at expiration, there are two possibilities for settlement. You can settle the option with cash or by a physical delivery of currency. If you are short an in-the-money option at expiration, you may need to deposit cash into your account to settle your account.
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1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
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Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes. Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.
Clothing is an often overlooked expense when planning a budget, but pretty much everyone has to spend some money on clothes for work, off hours, and social occasions. Whether you are a trial attorney who needs a wardrobe full of quality suits or a landscaper who gets good and muddy, there are ways to buy clothing without spending a fortune.
Here, learn what factors go into retail pricing, where to buy quality clothes, and how to snag some bargains.
Understand What Goes Into Retail Pricing
Fashion brands establish pricing on a cost-per-unit basis. The final retail price is set by factoring in various expenses and business strategies, such as manufacturing and material costs and marketing and branding expenses.
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Manufacturing Costs
The cost of raw materials, labor, packaging, and shipping are obvious factors that determine the price of clothing. But pricing is more nuanced than that. Popular brands or high-end brand names will set higher prices for their products on the assumption that they offer higher quality and better designs. There are also marketing costs to consider.
Brand Reputation
Whether a brand is perceived as a luxury brand, like Versace, or a value brand, like those sold at big box stores, will play a large part in pricing. For example, LuluLemon is a popular, in-demand brand that can price its clothing at the higher end of the scale. Sometimes a popular in-demand brand will have to slash its prices because it no longer holds the prestige it once did.
Supply and Demand
Supply and demand is a huge factor affecting the final price of a product. If a style, product, or brand is in demand, retailers can mark up the prices substantially. The fact that there is not enough to go around means people will likely pay more. (Inflation can be part of this equation, too.)
However, if the supply exceeds demand, retailers will have to drop the price to try to encourage sales so they are not left with inventory they cannot sell.
The Distribution Chain
Another factor in the price of clothing is the distribution chain. Some brands manufacture their own clothing and sell exclusively through their own retail outlets, which can help them keep the price lower. Warby Parker is an example of a retail brand that sells exclusively through their own retail outlets and website.
This business model means fewer add-on costs for the consumer. However, most brands sell through selected independent retailers who add on their own margin. Retailers set the final price by implementing their own desired markups, as well as any subsequent promotions and discounts to ensure they aren’t left with inventory. 💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.
Seasonality
Some fashions are in demand for a season only and can be priced high until they lose their popularity. At that point, the price will drop or clothes are sold in a clearance sale as retailers try to get rid of old inventory.
You can save money by buying clothes in the off-season or when they are sold on clearance. There are also other ways to make sure you’re not blowing all of your budget on clothes.
Make Use of Coupons
Coupons are a sales strategy for retailers, but they also benefit the consumer. Consumers can shop online for less using coupons and other sales discounts. The buyer inputs a coupon code when they check out, and that code initiates a discount on the price.
Coupons can be found on many websites such as Saving Says, RetailMeNot, and SlickDeals. Also, many brands offer a discount if you sign up for their email list.
Buy Clothing from Consignment Stores and Thrift Shops
Buying second-hand clothes is one way to find quality clothes while sticking to a budget. Thrift shops and websites that sell pre-owned clothing are growing in popularity, particularly because of consumer interest in sustainable practices and brands that support the environment.
ThredUp is a popular online consignment and thrift store where consumers can buy and sell high-quality secondhand clothes. Other ideas for where to buy good quality clothes for less include ASOS Marketplace, Buffalo Exchange, Depop, Etsy, Poshmark, and Vinted.
Recommended: Guide to Selling Used Items
Buy During the Off-Season
Avoid buying on impulse by purchasing clothing in the off-season when you can find quality items on sale. Retailers want to get rid of stock when products are not in season. For example, few people are looking to buy ski gear in the height of spring or summer. Because there may be more supply than demand for ski gear at that time, retailers will reduce the price and sell the clothing at a discount. 💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.
Look for Clearance Sales
Fashion trends typically last one season, and then new styles and products appear on the market. Retailers may find themselves with too much inventory going into a new season. To sell the inventory and not lose too much money, they will sell items in clearance sales, often with slashed prices.
Also, certain retailers are known for having regular sales cycles, such as the Gap and Old Navy. These can be good resources for where to buy good quality clothes on sale.
Consider Alternative Fabrics and Materials
Why does one t-shirt cost $50 and another $15? It could be because the $50 t-shirt has better quality fabric. Similarly, a pair of boots made of leather will be more expensive than a pair made of synthetic leather. In some cases, you might pay more for an item of clothing made of more durable or breathable materials. Investment pieces may be made of finer materials and crafted with more care to last longer.
However, if an item is serving a short-term fashion need, the quality of materials may be less important.
Also, less pricey synthetic materials may get a bad rap. For example, faux leather may be considered an unsuitable material for a shoe because it is unbreathable and less durable. Polyester is often compared to silk and is lambasted for not being “natural.” However, faux leather footwear may appeal to vegans, and polyester blouses last a lot longer than their silk counterparts. So, don’t discount alternatives.
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See Before You Buy
If you do opt for the less expensive option, you might want to see the item before you buy it. If the item is too cheap and flimsy, it won’t last long. Check the seams and the hems to see if the stitching is acceptable, and check that the zip works. Buying a reasonably priced item of clothing is one thing, but there is such a thing as too cheap.”
Buy Less, Buy Better
Buying fewer clothes will save you money, so you might think about items to save up for, perhaps one or two quality pieces that will last the test of time. You can pair those quality and timeless pieces with other less expensive items. For example, a couple of quality suits for work can be paired with a number of blouses or shirts that come from a mid-range retailer. You can also build a wardrobe based on a basic color, like black or blue, so that all of your clothes can be mixed and matched.
Note: Also remember to note care labels when purchasing clothes. Those that say “Dry clean only” mean they will cost you more over their life in cleaning than those that can go in the washer or be hand-laundered at home.
Recommended Brands
Some mid-price quality fashion brands recommended by experts are COS, Everlane, H&M, Land’s End, LL Bean, and Uniqlo.
The Takeaway
Dressing well does not have to be a wallet-busting affair if you know where to buy quality clothes and which strategies to follow. In some cases, it is better to pay more for an item that will be durable and serve its purpose rather than to buy something cheap and experience frustration when it doesn’t wear well. However, even then, you can find discounts by using coupons, searching for clearance sales, buying second hand, or buying off season.
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FAQ
Where to buy cheap good quality clothes?
Consignment stores and thrift stores are good places to buy good quality clothes for cheap. If you want to buy new, popular mid-range fashion brands are COS, Everlane, H&M, Land’s End, LL Bean, and Uniqlo.
How do I not spend all my money on clothes?
Avoid spending too much money on clothes by setting a budget and sticking to it. Also, don’t buy on impulse and focus on buying a few classic, high-quality pieces to match with less expensive tops and accessories. Build your wardrobe around a color so that you can mix and match and get more wear out of your clothes.
How can I be fashionable on a low budget?
The trick to being fashionable on a low budget is to choose a few quality items that you can pair with inexpensive, trendier items.
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LOS ANGELES (AP) — The spring homebuying season is off to a sluggish start as home shoppers contend with elevated mortgage rates and rising prices.
Sales of previously occupied U.S. homes fell 4.3% in March from the previous month to a seasonally adjusted annual rate of 4.19 million, the National Association of Realtors said Thursday. That’s the first monthly decline in sales since December and follows a nearly 10% monthly sales jump in February.
Existing home sales also fell 3.7% compared with March last year. The latest sales still came in slightly higher than the 4.16 million pace economists were expecting, according to FactSet.
A modest pullback in mortgage rates early this year helped lift home sales in January and February, but rates mostly ticked up in February and March, when many of the home sales that were finalized last month would have taken place.
AP correspondent Shelley Adler reports on the spring homebuying season.
Mortgage rates have risen the past three weeks, with the average rate on a 30-year mortgage moving this week above 7% to its highest level since late November, mortgage buyer Freddie Mac said Thursday.
The trend is a setback for home shoppers this spring homebuying season, traditionally the housing market’s busiest time of the year.
“Home sales essentially remain stuck because (the) mortgage rate has been stable and inventory is not really rising,” said Lawrence Yun, the NAR’s chief economist.
Despite the pullback in sales, the national median home sales price climbed 4.8% from a year earlier to $393,500. That’s the highest median sales price for any March on records going back to 1999 and marks the ninth month in a row that prices have risen compared to a year earlier.
The latest surge in prices reflects the heightened competition many home shoppers are facing. Consider, 60% of homes purchased in March sold within less than a month of hitting the market. And 29% of homes sold above their initial list price, up from 28% in March last year, Yun said.
“Inventory is simply not there,” he said.
While the supply of homes on the market remains below the historical average, the typical increase in homes for sale that happens ahead of the spring homebuying season gave home shoppers a wider selection of properties to choose from.
At the end of last month, there were 1.11 million unsold homes on the market, a 4.7% increase from February and up 14.4% from a year earlier, the NAR said. That’s still well short of the 1.7 million homes on the market in March 2019, before the pandemic.
The available inventory at the end of last month amounted to a 3.2-month supply, going by the current sales pace. That’s up from a 2.9-month supply in February and a 2.7-month supply in March last year. In a more balanced market between buyers and sellers, there is a 4- to 5-month supply.
That shortage of homes on the market means home sellers generally having an edge on buyers, especially those vying for the most affordable homes, which often fetch multiple offers.
The U.S. housing market is coming off a deep, 2-year sales slump triggered by a sharp rise in mortgage rates and a dearth of homes on the market. Sales of previously occupied U.S. homes sank to a nearly 30-year low last year, tumbling 18.7% from 2022 as the average rate on a 30-year mortgage surged to a 23-year high of 7.79%, according to Freddie Mac.
The average rate on a 30-year mortgage got as low as 6.67% in mid January, but has been creeping higher, reaching 7.1% this week. When mortgage rates rise, they can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford.
Mortgage rates have mostly drifted higher in recent weeks as stronger-than-expected reports on employment and inflation stoked doubt among bond investors over how soon the Federal Reserve will move to lower its benchmark interest rate.
Home loan borrowing rates are influenced by several factors, including how the bond market reacts to the Fed’s interest rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
The yield on the 10-year Treasury jumped to around 4.66% on Tuesday — its highest level since early November — after top officials at the Federal Reserve suggested the central bank may hold its main interest steady for a while. The central bank wants to get more confidence that inflation is sustainably heading toward its target of 2%.
Many economists still expect that mortgage rates will ease modestly this year, which could give homebuyers who can’t afford to pay all cash for a home more purchasing power.
“The 30-year-fixed mortgage rate could rise for few months to maybe even 7.5% before settling back down to 6.5% by the end of the year,” Yun said. In January, NAR forecast the average rate would drop to 6.1% by year’s end.
Economists at Realtor.com also project that the rate could average 6.5% by the end of this year.
For now, first-time homebuyers who don’t have any home equity to put toward their down payment continue to have a tough time getting into the housing market, though they accounted for 32% of all homes sold last month, an increase from 26% in February and 28% in March last year. That’s still well short of the 40% of sales they’ve accounted for historically.
Prospective homebuyers are facing competition from buyers who can afford to buy a home in cash. Some 28% of homes sold last month were purchased entirely with cash, down from 33% in February, but up from 27% a year ago, the NAR said.