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It was an action-packed week for the housing and mortgage market. Wednesday’s Fed announcement was the highlight, but we also got several economic reports that caused rate volatility. Thankfully, it was mostly the good kind.
The week got off to a slightly stronger start with Monday’s only major rate news being updated borrowing estimates from the Treasury Department. Why would such a thing matter?
Treasuries largely dictate day to day interest rate momentum in the U.S. because they are abundant, simple, and as close to risk-free as it gets. As such, Treasuries are the universal yardstick for all other debt in the U.S., including MBS, the mortgage-backed securities that have the most direct impact on mortgage rates. This is why Treasury yields and mortgage rates correlate so well over time.
Treasuries can take cues from several sources. One of the biggest is the change in the outright level of supply. In other words, how much more debt is the U.S. government issuing in the upcoming quarter? If that number is higher than expected, it puts upward pressure on rates. Monday’s news from Treasury was fairly palatable and roughly in line with market expectations, which allowed rates to stay steady.
Things changed on Tuesday when the Employment Cost Index (ECI) data came out. This is one of several reports that the Fed has mentioned as being important to the rate outlook recently. Higher numbers mean higher rates, all other things being equal. This week’s installment showed Q1 costs at 1.2, up from 0.9 in Q4 and well above the market consensus of 1.0. Rates hit the highest levels of the week as a result, both in terms of Treasury yields and mortgage rates.
Things changed on Wednesday. The morning economic data did no harm, but didn’t necessarily deserve much credit for turning things around. Those honors went to the Fed Announcement in the afternoon–specifically: Fed Chair Powell’s press conference.
Markets already knew the Fed wouldn’t change rates at this meeting, so the focus was likely to be on Powell anyway. Expectations were more varied as to how he might address the recent inflation data, but we knew he’d have to be less convinced than last time when it comes to 2024 rate cut prospects.
Unsurprisingly, Powell acknowledged that what had looked like one month of noise earlier in the year was now an undeniable and unwelcome shift in progress toward lower inflation. Nonetheless, he expects progress to get back on track in the coming months and for the Fed’s next move to be a cut instead of a hike.
Markets also appreciated his clarification on political matters. Many analysts have suggested the Fed won’t be able to cut rates until December because it risks looking like a political move if it happens before November’s election. But Powell was clear in saying the Fed would take whatever monetary policy action it deemed appropriate whenever the data suggested it. In other words, if inflation were to begin falling in a more meaningful way in the next several months and if the economy began to falter, we would not have to wait several more months for the Fed to deliver some rate relief.
With that, momentum had shifted in favor of lower rates for the week. There was some follow-through on Thursday, but even better gains on Friday after the latest monthly jobs report came out weaker than expected. Job creation fell to its lowest level since October, and that’s in line with the lowest since covid lockdowns. It was also well below the forecast consensus (175k versus 243k).
Historically, 175k is a solid number, but everything’s relative. Rates typically fall when the job count undershoots the forecast by that much and Friday was no exception. 10yr Treasury yields and mortgage rates ended the week at the lowest levels since April 9th. Traders further lowered their outlook for the end-of-year Fed Funds Rate, once again pricing in at least one full cut this year.
On the housing data front, the week’s most notable releases were the two leading national price indices from FHFA and Case Shiller. Both were much higher than forecast for the month of February, showing annual growth of 7.0% and 7.3% respectively.
From here, the calendar is comparatively much more quiet until the biggest economic report of the month on April 15: the Consumer Price Index (CPI). This is the broad inflation index that has been at the scene of many crimes against the world of interest rates. Reactions have been big enough that it’s not uncommon to see rate momentum fizzle sideways as traders wait for the next inflationary shoe to drop.
Source: mortgagenewsdaily.com
Mortgage rates eased slightly last week after a cooler-than-expected jobs report. Additionally, the 10-year Treasury yield fell after Friday’s jobs report.
HousingWire’s Mortgage Rates Center showed the average 30-year fixed rate for conventional loans at 7.51% on Tuesday, slightly below the rate of 7.57% one week ago. At the same time one year ago, the average rate was 6.54%.
The 15-year fixed rate averaged 6.77% on Tuesday, down from 6.79% one week earlier.
“The labor market has always been my key variable for lower rates, and last week’s headline jobs number missed, while wage growth came in cooler than anticipated,” HousingWire lead analyst Logan Mohtashami said. “However, the other critical labor data are getting softer, such as job openings data and job openings quit rate. The Fed really follows the job openings quit rate as it’s a measure of labor tightness, and it is below COVID-19 levels.”
As of May 3, there were just under 600,000 single-family homes on the market, up 33% from last year, according to data from Altos Research. The available supply of unsold homes is rising and is likely to continue growing through the summer, according to Mike Simonsen, founder and president of Altos Research.
“In a few weeks, we expect the market will have more homes available than at anytime in the past three years,” Simonsen wrote on Monday. “By the end of the summer, it looks like inventory will finally be back above 2020 levels. But it’ll take several more years of elevated mortgage rates before inventory builds back to pre-pandemic levels of 2019 or earlier.”
Between April 26 and May 3, however, inventory only ticked up by 1%, rising from 556,291 to 559,744. Simonsen expects to see 700,000 homes on the market before the typical seasonal decline takes hold in the fall.
Source: housingwire.com
My model for inventory growth with higher mortgage rates came crashing down last week. After two weeks of significant increases, inventory growth slowed dramatically and is far from my 11,000-17,000 growth model with mortgage rates over 7.25%. Did the recent dip in mortgage rates play a role here or is this the average choppy weekly data we have seen in past years? Let’s delve into the weekly data to see what we can uncover.
I was looking for a hat trick this week after higher mortgage rates fueled more inventory growth, but that stalled out last week. It’s important to note that the weekly data can be volatile, so I won’t overreact to one week of slow inventory growth data, but it was disappointing to see just 3,453 homes added. Last year, during this same timeframe, inventory fell week to week as well, so always remember that a trend is more important than one week’s data. Note that we do have Mother’s Day weekend next week.
New listing data has been a positive story all year, as we have seen consistent growth from 2023 levels, which saw the lowest recorded levels of new listings ever. I wish new listings were growing faster, but I will call it a victory nonetheless. We saw a slight decline in new listings data week to week. For now, I will chalk this up to the seasonal choppiness we sometimes see with inventory data. Here’s the new listings data for last week over the last several years:
In an average year, one-third of all homes take a price cut — this is standard housing activity. When mortgage rates increase, demand falls and the price-cut percentage grows. When rates drop and demand improves, the percentage falls.
The price-cut percentage growth in 2024 is much slower than in 2022, when rates spiked more aggressively. The second half of 2022 had the biggest and fastest decline in home sales ever, and after November of 2022, the epic home sales crash stopped. This can explain why the slope of the price-cut curve was faster and stronger in 2022 than in 2023 or so far in 2024.
We had an exciting week with the 10-year yield and mortgage rates. The Federal Reserve tried to maintain a balanced stance on when the next rate cut would happen, which I talked about in this HousingWire Daily podcast.
Then, the 10-year yield fell after the jobs report showed that wage growth slowed. I wrote about the wage growth slowdown and how that ties into the Fed’s model in my analysis of the jobs report. Looking at all of these factors — the Fed meeting points, the softness in job openings and the jobs Friday data — can explain the decline in yields and mortgage rates last week.
Mortgage spreads have been terrible for some time now, but 2024 is far from the peak stress we saw in this data line in 2023. If we were at the same level as the worst spreads in 2023, mortgage rates would be 0.52% higher currently. So, the spreads getting better this year is a positive storyline. I hadn’t anticipated we would see this until the Fed starts cutting rates, so I got this wrong in 2024.
Purchase application data didn’t move much again last week, down 2% week to week and 14% year ove year. Remember, for any growth we see in this data line in the future, context is critical since we’re working from the lowest levels ever.
Since November 2023, when mortgage rates started to fall, we have had 11 positive prints versus nine negative prints and two flat prints week-to-week. Year to date, we have had five positive prints, nine negative prints, and two flat prints.
This week we have a light week on the economic front with jobless claims data, used car prices and some Fed presidents talking. I will be watching the 10-year yield closely. Whenever you have jobs week combined with a Fed meeting, the bond market action can act wild, so I am interested to see how the market reacts after digesting what happened last week.
Source: housingwire.com
The adjustable-rate mortgage (ARM) share of activity continued to grow despite the downturn in overall applications, according to the latest data from the Mortgage Bankers Association (MBA). Overall mortgage applications decreased 2.3% for the week ending April 26 as the average rate on a 30-year fixed mortgage rose to 7.29%, the highest since November 2023. … [Read more…]
The average for a 30-year fixed-mortgage is 7.34% today, up 0.02% over the last week. The average rate for a 15-year fixed mortgage is 6.74%, which is a decrease of -0.02% from the same time last week. For a look at mortgage rate movement, see the chart below.
Because inflation data hasn’t been improving, the Federal Reserve has been pushing off rate cuts. Though mortgage rates could still inch down later in the year, housing market predictions change regularly in response to economic data, geopolitical events and more.
Mortgage rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Each mortgage has a loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. With a fixed-rate mortgage, the interest rate is set for the duration of the loan, offering stability. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market. Fixed-rate mortgages are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.
The 30-year fixed-mortgage rate average is 7.34% today. A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.
Today, the average rate for a 15-year, fixed mortgage is 6.74%. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.
A 5/1 adjustable-rate mortgage has an average rate of 6.74% today. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.
Over the last few years, high inflation and the Federal Reserve’s aggressive interest rate hikes pushed up mortgage rates from their record lows around the pandemic. Since last summer, the Fed has consistently kept the federal funds rate at 5.25% to 5.5%. Though the central bank doesn’t directly set the rates for mortgages, a high federal funds rate makes borrowing more expensive, including for home loans.
Mortgage rates change daily, but average rates have been moving between 6.5% and 7.5% since late last fall. Today’s homebuyers have less room in their budget to afford the cost of a home due to elevated mortgage rates and steep home prices. Limited housing inventory and low wage growth are also contributing to the affordability crisis and keeping mortgage demand down.
Most housing market experts predict rates will end the year between 6% and 6.5%. Ultimately, a more affordable mortgage market will depend on how quickly the Fed begins cutting interest rates. The central bank could start lowering interest rates in the fall, but it will depend on how the economy fares in the coming months.
Mortgage rates fluctuate for many reasons: supply, demand, inflation, monetary policy, jobs data and market expectations. Homebuyers won’t see lower rates overnight, and it’s unlikely there will ever be a return to the 2-3% mortgage rates we saw between 2000 and early 2022.
“We are expecting mortgage rates to fall to around 6.5% by the end of this year, but there’s still a lot of volatility I think we might see,” said Daryl Fairweather, chief economist at Redfin.
Every month brings a new set of inflation and labor data that can influence the direction of mortgage rates, said Odeta Kushi, deputy chief economist at First American Financial Corporation. “Ongoing inflation deceleration, a slowing economy and even geopolitical uncertainty can contribute to lower mortgage rates. On the other hand, data that signals upside risk to inflation may result in higher rates,” Kushi said.
Here’s a look at where some major housing authorities expect average mortgage rates to land.
Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.
Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.
Source: cnet.com
There haven’t been many appealing options for borrowers in the last two years.
With inflation problematic, interest rates were elevated to help rein it in. And while that caused inflation to drop from a decades-high in June 2022, interest rates have been stuck at their highest level in 23 years. On Wednesday, the Federal Reserve elected to maintain that level, keeping the benchmark interest rate range unchanged between 5.25% and 5.50%. This has resulted in higher borrowing costs for everything from mortgages and auto loans to personal loans and credit cards.
One alternative that has remained cost-effective, however, has been home equity. By tapping into their equity via a home equity loan or home equity line of credit (HELOC), homeowners have gained access to large sums of money, often at much lower interest rates compared to the alternatives. But an even lower interest rate is always preferable, leading some to wonder if home equity loan rates will drop further this month. Below, we’ll break down what to expect now.
See what home equity loan rate you could secure online today.
While the Federal Reserve kept interest rates unchanged this week, the implication that higher rates may be staying high for longer was clear. Even absent a formal increase in rates, rates on borrowing products like home equity loans and HELOCs may rise slightly if lenders believe that a rate hike is imminent.
So not only is it unlikely for home equity loan rates to fall in May — they may actually rise. That possibility could become more pronounced if the next inflation report, scheduled to be released on May 15, shows inflation rising yet again. If that happens, an interest rate hike becomes more likely — and rates on home equity products could rise.
Against this backdrop, then, homeowners may want to be proactive. Home equity loan rates are fixed (unlike HELOCs, which are variable). So by pursuing a home equity loan today, owners can lock in today’s low rate before it potentially rises further. And, if rates somehow drop in the months to come, owners could refinance their loan then. What they shouldn’t do, however, is rate for a better rate climate. Instead, get started now and lock in the lowest rate you can find.
Explore your home equity loan options here to learn more.
A lower interest rate isn’t the only selling point for home equity loans now. Here are two other reasons why you may want to pursue this option today:
Home equity loan rates are unlikely to fall in May and they could even rise as the month goes on. But because of that likelihood, and because of the low rate borrowers can secure now, it may be beneficial to act promptly. Combined with beneficial features like access to large sums of money and potential tax deductions for qualifying uses, a home equity loan can be your go-to credit option now. As with all financial products, however, be sure to weigh the pros and cons of this unique loan, as you could risk losing your home in the process if you can’t pay back what you borrow.
Source: cbsnews.com
Jasmine Hyman is the assistant shopping editor at Cosmopolitan where she covers all the best things you can add to your cart. She loves writing about everything from fashion to politics, and you can definitely find her listening to Harry Styles’ entire discography on loop while doing so. She’s also probably in bed either reading or endlessly scrolling through TikTok (most likely the latter). Feel free to follow her on Insta to be inundated with pictures of her meals.
Sarah Maberry is a commerce writer for Hearst Magazines, where she covers fashion, beauty and pop culture. A seasoned trend forecaster and fashion historian, she analyzes viral products and trends on a deeper level. When she’s not writing for Cosmopolitan, ELLE, Harper’s BAZAAR, House Beautiful, Town & Country, Delish and other publications, she can be found roaming the Museum at FIT (her alma matter) or sewing her own couture while she binge-watches reality TV.
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Source: cosmopolitan.com
Housing experts say mortgage rates are likely to hover in the 7 percent range in May, amid elevated inflation that is keeping the Federal Reserve from reducing borrowing costs.
The high cost of home loans may keep buyers at bay as they await the decline of rates before they can make the leap toward homeownership.
Read more: Find the Lowest Rates From Top Mortgage Lenders
The Federal Reserve raised interest rates starting in March 2022 to its current two-decade high of 5.25 to 5.5 percent, a move geared to fight soaring inflation. This contributed to the push-up of borrowing costs, including for home loans. Inflation is still struggling to cool down to the 2 percent central bank target, which has forced policymakers to retain the high interest rate environment.
The 30-year fixed rate, for the week ending April 19, rose for the third week in a row to 7.24 percent—the highest level since November 2023.
Economic data, particularly around inflation, have come in higher than expected over the last few weeks. In March, inflation jumped to 3.5 percent on a yearly basis, up from 3.2 percent the prior month.
Unless inflation surprises in the coming weeks, mortgage rates are likely to stay in the 7 to 7.5 percent range, according to Realtor.com’s chief economist Danielle Hale. Fed policymakers are set to conclude their latest meeting on May 1, and they are unlikely to change their current stance on rates.
“Of all the data, I think that the inflation, specifically the [Consumer Price Index] out May 15, will have the biggest impact,” Hale told Newsweek. “Inflation and labor market data has come in higher and hotter than expected. This change in the data, which is driving a change in the outlook, has pushed interest rates, including mortgage rates, higher across the board.”
Read more: How to Get a Mortgage
High mortgage rates will depress buyers’ ability to buy homes.
“I expect homebuyers to approach the housing market more tepidly, and sales will reflect that trend,” Hale told Newsweek.
Orphe Divounguy, a senior economist at Zillow Home Loans, echoed Hale’s perspective on what will drive mortgage rates as inflation remains elevated.
“The fact that government borrowing remains high relative to demand for U.S. Treasury bonds is likely to continue to push yields—which mortgage rates follow—elevated,” he told Newsweek. “Looking into May, we can expect more rate volatility as investors and the Fed wait for more conclusive evidence of a return to low, stable and more predictable inflation.”
Buyers are still likely to be waiting for rates to fall but the key to the trajectory of rates will be how inflation performs over the coming months, said Holden Lewis, a home and mortgage expert at NerdWallet.
“Inflation remains stubbornly above the Fed’s target of 2 [percent], and mortgage rates won’t fall significantly until the inflation rate consistently drops for multiple months in a row,” Lewis told Newsweek. “Potential home buyers are holding back and waiting for mortgage rates to decline. The slowdown in home sales will allow the inventory of unsold homes to increase. That won’t stop home prices from going up, but it might slow down the pace of home price increases this summer.”
In May, policymakers from the Fed will reveal their latest rate decision and provide insights on the trajectory of borrowing costs. Also in May, the CPI inflation data reading for April will give insight into how prices are performing, which will give a signal to how rates might unfold over the next few weeks.
For the housing market, one silver lining may come from buyers who have to acquire homes due to personal situations.
Read more: How to Buy a House if You Have Bad Credit
“Purchases are likely to be dominated by movers who feel like they don’t have a choice to wait out higher rates, but rather, they have to move now for personal reasons,” Hale said.
Zillow’s Divounguy suggested that with mortgage rates expected to stay high, lower-priced homes could see escalated competition.
“We continue to expect significant competition this spring, especially for attractive listings on the lower end of the price range. New construction homes are selling well too; they’re available, and builders are offering financial incentives—such as rate buydowns and covering closing costs—to potential home buyers,” he said. “Remember, higher rates mean the home price a buyer can afford is lower, so if you’re shopping for a home in the mid-tier or lower, it’s best to assume you’ll run into some competition.”
Hale suggested that sellers, who can also be buyers, enter the housing market.
“With 80 [percent] of potential sellers having thought about selling for 1 to 3 years, it could be that higher rates are less of a deterrent this year than in the recent past,” she said.
The perspective from lenders appears to be that the 10-year treasury yields, currently at around 4.7 percent, will drop in the coming weeks to 4 percent and narrow the difference between mortgage rates and treasury rates.
“We expect the spread will tighten further by the end of 2024. The combination implies a 30-year fixed mortgage rate mostly unchanged in the coming weeks but eventually moving closer to 6.5 percent by the end of 2024,” Joel Kan, Mortgage Bankers Association’s deputy chief economist, told Newsweek.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
Iowa provides residents a quintessential American experience characterized by its rich agricultural heritage, tight-knit communities, and scenic landscapes. From the vibrant urban energy of Des Moines, with its thriving arts scene and culinary delights, to the charming small-town charm of Iowa City, home to the University of Iowa and a bustling cultural scene, Ohio offers experiences for every lifestyle. However, there are cons to living in In this state. In this ApartmentGuide article, we’ll go over the pros and cons of living in Iowa, so you can learn what life is like in “The Hawkeye State.”
Iowa has an affordable cost of living, with lower housing costs, utilities, and overall expenses compared to many other states. Cities like Des Moines and Cedar Rapids offer residents access to affordable housing options, with median home prices and rental rates below the national average. For example, the median home price in Cedar Rapids is $182,500, making homeownership more attainable for many Iowa residents. Rental prices remain equally affordable, with the average one-bedroom apartment renting for $776.
Iowa experiences harsh winter weather conditions, with cold temperatures, heavy snowfall, and icy roads posing challenges for residents. Sioux City often contend with extreme cold snaps and blizzard conditions, leading to school closures, transportation disruptions, and safety concerns. Despite efforts to maintain roadways, winter storms can make travel hazardous, meaning you’ll need extra precautions navigating the icy terrain.
Iowa’s thriving agricultural sector plays a vital role in the state’s economy, providing abundant job opportunities and contributing to the nation’s food supply. The state’s fertile soil and favorable climate make it ideal for farming, with crops like corn, soybeans, and oats grown extensively across its vast farmland. Additionally, Iowa is a leading producer of corn and hogs, with agricultural activities deeply ingrained in its cultural identity.
Residents in rural areas of Iowa may experience feelings of isolation and limited access to services and amenities. Towns like Decorah and Carroll may lack the same level of infrastructure and resources found in larger cities, leading to challenges in accessing healthcare, shopping, and entertainment options.
Iowa has a rich cultural heritage, shaped by diverse immigrant communities and indigenous peoples who have left their mark on the state’s history. For example, the Amana Colonies preserve the traditions of German settlers, while the Meskwaki Settlement honors the heritage of the Sac and Fox Tribe of the Mississippi.
While Iowa offers some cultural attractions and events, larger cities in other states may have more extensive entertainment options. Cities like Waterloo may have fewer theaters, museums, and performing arts venues compared to metropolitan areas, limiting cultural experiences for residents.
Iowa is home to diverse natural landscapes, including rolling prairies, scenic rivers, and picturesque parks, offering residents ample opportunities for outdoor recreation and exploration. Places like Maquoketa Caves State Park and Effigy Mounds National Monument showcase Iowa’s natural beauty, attracting visitors with hiking trails, camping grounds, and wildlife viewing areas.
Within Tornado Alley, Iowa is prone to severe weather events like tornadoes during the spring and summer months. While tornado warning systems and emergency preparedness efforts help mitigate risks, residents must remain vigilant and have a plan in place to seek shelter during severe weather outbreaks.
Iowa’s relatively low population density results in minimal traffic congestion, making commuting and travel more efficient and stress-free for residents. Even in urban areas like Iowa City, residents enjoy shorter commute times and smoother traffic flow compared to larger metropolitan areas.
Iowa’s changing seasons can exacerbate allergies for some residents, particularly during the spring and fall. Pollen from trees like birch and oak can trigger allergic reactions, leading to symptoms such as sneezing, congestion, and itchy eyes.
Methodology : The population data is from the United States Census Bureau, walkable cities are from Walk Score, and rental data is from ApartmentGuide.
Source: apartmentguide.com
Our writers and editors used an in-house natural language generation platform to assist with portions of this article, allowing them to focus on adding information that is uniquely helpful. The article was reviewed, fact-checked and edited by our editorial staff prior to publication.
Buying a home doesn’t necessarily require a large down payment. The conventional wisdom is that you need 20 percent down, but in reality, you don’t have to save that much. In fact, there are no-down payment mortgage options. Here’s what you need to know about these types of loans.
A no-down payment mortgage is a home loan that allows you to finance 100 percent of the home’s purchase price without having to put any money down at closing. Zero-down mortgages can be particularly beneficial for those buying a home for the first time or with limited savings.
The easiest way to avoid a down payment is to qualify for one of the two no-down payment mortgage programs backed by the government: a USDA or a VA loan.
The U.S. Department of Agriculture (USDA) backs USDA home loans, a mortgage guarantee program for those buying a home in designated rural areas. There are many areas you might not consider “rural” that do qualify under USDA guidelines, so be sure to check your eligibility on the USDA website. USDA loans don’t require a down payment, but borrowers must meet credit and income requirements to qualify.
Although there’s no down payment with a USDA loan, there is an upfront guarantee fee of 1 percent of the principal loan amount, as well as an annual fee of 0.35 percent, which borrowers can roll into the cost of the mortgage. While you won’t pay any money initially if you choose to roll these fees into the loan, keep in mind that it adds to the total balance and will accrue interest over the loan term, which means you’ll pay more overall.
If you’re a military service member, veteran or surviving spouse, you could be eligible for a VA loan guaranteed by the U.S. Department of Veterans Affairs (VA) with no money down. There is no mortgage insurance requirement with this loan. However, like a USDA loan, you do have to pay an upfront funding fee, which can be rolled into the mortgage. The funding fee ranges from 1.25 percent to 3.3 percent of the loan amount. You can reduce the funding fee by making a down payment.
Another perk: VA loan lenders often offer more competitive rates for these products, which helps you save money over the life of the loan.
Compare: Current VA loan rates
In addition to government-backed loans, you might be able to explore:
If you don’t qualify for one of the no-money-down home loan options, you might still be able to buy a home with the next best thing: a low-down payment mortgage.
Insured by the Federal Housing Administration (FHA), an FHA loan requires only 3.5 percent down with a credit score as low as 580. (If you have a credit score between 500 and 579, you might be able to qualify with a higher down payment of 10 percent.) It’s a popular option for homebuyers with less-than-perfect credit and not a lot of savings. Like other government-insured programs, FHA loans are offered by private mortgage lenders, so you might also have to meet a lender’s criteria to qualify. Additionally, you’ll have to pay for FHA mortgage insurance, which adds to your monthly payment and the cost of the loan. You’ll pay these premiums for as long as you have the mortgage, in most cases.
Compare: Current FHA loan rates
Available through many mortgage lenders, the HomeReady program is a conventional loan backed by Fannie Mae. The down payment requirement on a HomeReady loan is just 3 percent. While you’ll have to pay mortgage insurance to compensate for the low down payment, it’s often at a lower price tag compared to other conventional loans.
Backed by Freddie Mac, Home Possible is a similar mortgage program to HomeReady, with a 3 percent down payment and mortgage insurance requirements.
Freddie Mac also offers a 3 percent down mortgage option for first-time homebuyers who qualify through its HomeOne program. The main difference between this loan program and Freddie’s Home Possible mortgage is that a HomeOne mortgage does not impose income limits.
Some lenders are now offering mortgage programs for borrowers who qualify that only require a 1 percent down payment. Some examples include Rocket Mortgage’s ONE+ program and United Wholesale Mortgage’s Conventional 1% Down program. For these programs, the lender pays 2 percent of the required 3 percent down payment for a HomeReady or Home Possible loan — or up to a maximum contribution that varies by lender and loan size — and you only need to provide the remaining 1 percent.
A Conventional 97 mortgage is another Fannie and Freddie program that only requires a 3 percent down payment. You might pay more for private mortgage insurance (PMI) with this type of loan, but your payment depends on your financial profile. You can also request to cancel PMI when you reach 20 percent equity in your home.
The Good Neighbor Next Door (GNND) program is for borrowers who work in select public service professions — teachers, firefighters, law enforcement and emergency medical technicians — and are planning to buy a home in a qualifying area.
The program, sponsored by the U.S. Department of Housing and Urban Development (HUD), provides a discount of up to 50 percent on a home with a down payment of just $100. The borrower must qualify for a first mortgage, and the discounted portion of the home comes in the form of another loan. If the borrower continues to meet program requirements, the second mortgage won’t have to be repaid.
The ability to buy a home with no or very little money down can be appealing, but there are drawbacks, too.
Deciding whether to go for a no-down payment mortgage depends largely on your financial circumstances and goals. Here are a couple of scenarios when a zero-down mortgage might be a good idea:
The Department of Veteran Affairs and the U.S. Department of Agriculture DA don’t set a minimum credit score requirement for, respectively, their no-money-down VA and USDA loans. However, most lenders offering these loans do, and they’d want them to be at least in the “fair” range: 620 for VA loans, 640 for USDA loans. Because you’re not bringing any cash to the table, and financing virtually all of your mortgage, the lender has to be extra-reassured that you pay your debts fully and on time.
Source: bankrate.com