Mortgage interest rates have continued in the mid-6% range for 16 weeks. The 30-year fixed mortgage interest rate declined slightly to 6.79% from 6.87% the week prior.
Home buyers purchasing a $400,000 home with a 20% down payment at a 6.79% interest rate would have a monthly mortgage payment of $2,084. This is a savings of $217 per month from when mortgage interest rates were 7.79% in October 2023. However, the typical first-time buyer does not put 20% down. Last year, the typical first-time buyer had a down payment of 8%. In that scenario, for a home buyer purchasing a $400,000 home with an 8% down payment at a mortgage interest rate of 6.79%, the mortgage payment would be $2,397.
Housing affordability is one reason the share of first-time buyers last month (at 26%) matched the lowest share ever recorded dating back to 2008. Inventory is the second critical component. First-time buyers need, value, and rely on the expertise of REALTORS® to help find the right home and with negotiations.
To qualify, applicants must meet specific criteria, the Atlanta, Georgia-based firm outlined, including: Closing the loan with Citizens Trust Bank Income not exceeding $150,000 Maximum of $25,000 in assets The property must be owner-occupied Borrower contribution of at least $500 Completion of a homebuyer education course Can be combined with other approved down payment assistance … [Read more…]
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In 2024, homebuyers can expect lower mortgage rates, higher home prices, and a lot more competition.
Hopeful buyers should start preparing as early as possible by saving money and paying down debt to improve credit scores.
Look into affordable mortgage programs and down payment assistance to boost affordability.
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After watching mortgage rates hit two-decade highs and inventory plummet last year, many hopeful homebuyers are eager to get off the sidelines and into a home.
While 2024 is expected to be a better year for the housing market in many respects, a lot of buyers are still going to struggle to find affordability. If you’re planning to buy a house this year, here’s what you need to know about housing market predictions in 2024, and how you can prepare.
Home price predictions 2024
Experts generally expect home prices to increase in 2024.
Low home inventory is a chronic problem in the US. This has generally kept home prices up, even as mortgage rates peaked near 8% and homebuying demand plummeted last year. Demand is expected to increase this year, so even if home prices were to drop in 2024, they likely wouldn’t fall enough to significantly improve affordability on their own.
Mortgage rate predictions 2024
Here’s where we’ll probably find more affordability in 2024: mortgage rates. Though they’re still relatively high, experts predict we’ll see mortgage rates go down in 2024. The average 30-year fixed mortgage rate is generally expected to end up near 6% by the end of the year.
Fannie Mae believes 30-year fixed rates could inch down to the mid-to-upper 6% range during the buying season — which typically lasts from spring through early fall — and reach 6.4% by the end of 2024
The MBA’s forecast is slightly less aggressive, predicting that mortgage rates could hover in the 6.3% to 6.6% range during the peak homebuying season before falling to 6.1% to close out 2024
NAR predicts rates will be in the mid-6% range for the homebuying season and drop to 6.1% in the last quarter of the year
Whether mortgage rates actually trend down in 2024, and by how much, depends in part on the path the Federal Reserve takes in its fight against inflation.
The Fed has indicated that it may start cutting the federal funds rate this year, which would remove a lot of upward pressure off of mortgage rates and allow them to fall more substantially. But inflation has remained a bit higher than expected in recent months, so we might have to wait longer for a Fed rate cut. This means mortgage rates might not fall in time for the peak homebuying season.
Will the housing market crash in 2024?
Because home prices have increased so dramatically in recent years, doomsayers believe that the housing market is in a bubble, and it’s only a matter of time before it bursts and the market crashes. But it’s actually pretty unlikely that will happen.
One of the main reasons we’re unlikely to see the housing market crash in 2024 has to do with housing inventory. The US simply does not have enough homes to meet demand, which is keeping prices steady.
Of course, no one has a crystal ball. If demand were to plummet, home prices could start falling. A severe recession could cause this to happen, for example. But even with a recession, it’s not a given that the housing market would crash as a result.
When will the housing market crash?
The fact is, it’s hard to predict a housing market crash. Right now, the conditions aren’t right for one — even though demand is low, supply remains even lower. And demand is expected to improve this year, while supply will likely remain a chronic problem for years to come.
What this means for 2024 homebuyers
If you’re hoping to buy a house this year, you’ll want to start planning now. This year is likely to be better for buyers than 2023 was in many ways, but it’s also going to be more challenging when it comes to prices and competition.
Lower mortgage rates will undoubtedly improve affordability for borrowers, but with that will come increased demand. This will keep home prices high and likely push them up even further. Finding a home in your price range may become even trickier, and you may need to make a lot of offers on homes before you get one accepted.
How to prepare to buy a house in 2024: 5 tips
Here’s what you should be doing now to prepare for homeownership in 2024.
1. Get your finances ready now
Because home prices are likely to remain high, you’ll want to take advantage of lower mortgage rates by making sure you get the lowest rate you can.
One of the faster methods to get your credit score up is to lower your credit utilization. This will also decrease your debt-to-income ratio, which is another factor mortgage lenders look at when considering what rate to give you.
J.R. Russell, head of direct to consumer mortgage lending at Citi Mortgages, says homebuyers should consider paying off credit card balances to improve their scores ahead of the 2024 homebuying season.
“If you’re trying to pay off or pay down some credit cards, start with the cards or credit lines with the highest interest rates first,” Russell says. “Then, pay off the balances that are smallest. The good news is that if you do this, you’ll improve your debt load and your credit score.”
2. Look for affordable mortgages and other first-time homebuyer assistance
The key to affording homeownership for many buyers in 2024 will be utilizing mortgages geared toward first-time homebuyers and combining them with grants or other forms of down payment assistance.
“If you’re not sure that your down payment will be sufficient, take time to understand all of the available products that you may be eligible for through the FHA or VA, your bank, or other local institutions,” Russell says. “These programs may grant you access to down payment assistance and low-to-moderate income programs, among other game-changing resources.”
Conventional loans allow down payments as low as 3%, while FHA loans allow 3.5% down payments. USDA and VA loans allow no down payment.
Look into lenders that offer special mortgage programs that come with additional assistance. Rocket Mortgage, for example, offers a ONE+ mortgage that allows borrowers to put down just 1%, with the lender providing a 2% grant.
Bank of America mortgages, another popular lender for first-time buyers, offers a couple of different forms of down payment assistance.
3. Time your purchase right
There probably won’t be a single “best time” to buy in 2024, because that depends on each buyer’s priorities — so it’s important that you figure out yours.
If getting the lowest rate possible is most important to you, you’ll want to wait until later this year to buy, possibly until the second half of 2024. But if you’re looking to avoid competition, buying within the next few months might be a better bet. Plus, you could always plan to refinance later on as rates drop.
4. But don’t rush
“If rates do start to moderate and the market does seem to become more favorable to buying in 2024, it will likely stay this way for a while,” Russell says. “If that’s the case, I encourage you to take your time! Don’t put pressure on yourself to make any potentially hasty decisions on what may be your biggest asset and the largest financial decision of your life.”
Though it’s still a while away, forecasts generally expect mortgage rates to continue falling in 2025. If you don’t feel ready to buy by the time the 2024 buying season rolls around, there’s nothing wrong with waiting a bit to continue saving and working on your credit.
5. Build your savings
Whether you’re padding your mortgage down payment savings or contributing to your emergency fund, tucking away some extra cash now is vital if you plan on buying a home soon.
When you buy a house, you’ll need enough cash to cover both your down payment and closing costs, which can amount to between 3% and 6% of the loan amount. While many mortgage programs allow low down payments, the more you can put down, the better your interest rate will likely be. Plus, offers with larger down payments are often more attractive to home sellers, giving you a competitive edge in what will likely be a tough market.
Homeownership is also often more expensive than many first-time buyers realize, especially in the first year. Having some extra money set aside for unexpected costs will help ensure you don’t go into debt when your first big housing expense comes along.
Housing market predictions 2024 FAQs
Experts expect mortgage rates to drop in 2024, and 30-year fixed rates could end the year closer to 6%.
There probably won’t be a housing recession in 2024 based on current expectations, as limited inventory is likely to push prices up further. Expect to see higher prices, lower mortgage rates, and more buyers in 2024.
In general, 2024 should be a better year to buy a house compared to 2023, but it will still be tough due to increased competition and higher prices.
Rather than easing back from the January level as expected, existing home sales shot significantly higher in February, The National Association of Realtors® (NAR) said pre-owned single-family houses, townhouses, condominiums, and cooperative apartments sold at a seasonally adjusted annual rate of 4.38 million units. This is an increase of 9.5 percent from the 4.0 million unit pace the previous month and the largest monthly increase since last February. Sales still trailed that month’s 4.53-million-unit rate by 3.3 percent.
Analysts polled by Econoday had a consensus estimate for sales of 3.92 million units while Trading Economics had projected the rate at 3.94 million.
Single-family home sales grew to a seasonally adjusted annual rate of 3.97 million in February, a 10.3 percent gain, but were down 2.7 percent year-over-year. The annual sales rate for condos and coops (410,000 units) was 2.5 percent higher than in January, but 8.9 percent below the February 2023 pace.
Despite the increase in sales, the number of homes available for sale also climbed, rising 5.9 percent from January and 10.3 percent from the previous February to 1,07 million units. This is estimated at a 2.9-month supply at the current rate of sales. Still, inventory remains well below the five-to-six-month supply considered a balanced market.
The median existing home price for all housing types in February was $384,500, an increase of 5.7 percent from $363,600 a year earlier. It was the eighth consecutive month of year-over-year price gains and was the highest price ever recorded for the month of February. The median price for a single-family home was $388,700, a 5.6 percent annual increase while condos appreciated by 6.7 percent to a median of $344,000.
First-time buyers were responsible for 26 percent of the month’s sales and individual investors or second-home buyers accounted for 21 percent. Thirty-three percent of sales were all-cash. Properties typically remained on the market for 38 days in February, up from 36 days in January and 34 days in February 2023.
Sales rose in three of the four major regions compared to January but remained below the pace a year earlier in all four. For the fourth consecutive month, the Northeast posted a sales rate of 480,000 units. This was 7.7 percent below the previous February’s number. The median price in the Northeast was $420,600, an increase of 11.5 percent from one year ago.
“Due to inventory constraints, the Northeast was the regional underperformer in February home sales but the best performer in home prices,” NAR chief economist Lawrence Yun said. “More supply is clearly needed to help stabilize home prices and get more Americans moving to their next residences.”
In the Midwest, existing home sales rose 8.4 percent to an annual rate of 1.03 million, a 3.7 percent deficit year-over-year. The median price moved higher by 6.8 percent to $277,600.
Existing home sales in the South jumped 9.8 percent from January to an annual rate of 2.02 million, down 2.9 percent from one year earlier. The median price in the South was $354,200, up 4.1 percent from last year.
The greatest increase was in the West with a surge of 16.4 percent compared to January. The annual rate of 850,000 units was 1.2 percent below sales the prior year. Prices also surged, rising 9.1 percent to $593,000.
National Association of Home Builders (NAHB) analyst Fan-Yu Kuo, writing in the Eye on Housing blog compared results of NAR’s Pending Home Sales Index (PHSI), a measure of signed purchase contracts thought to be a leading indicator of existing home sales, to recent completed transactions. Kuo said the PHSI fell from 78.1 to 74.3 in January. On a year-over-year basis, pending sales were 8.8 percent lower than a year ago per the NAR data.
Freddie Mac on Friday announced that its president Michael Hutchins has been appointed interim CEO, effective March 16, but the company continues its search for a permanent appointment. He will replace Michael DeVito, who is retiring after three years in the job.
Hutchins, who is a member of the company’s senior operating committee, was also appointed a member of the board on Friday.
A veteran with 30 years of experience in the industry, Hutchins joined Freddie Mac in 2013 as senior vice president and then executive vice president of investments and capital markets. In 2020, he was appointed Freddie Mac president, overseeing single-family and multifamily investments, capital markets, operations, and technology divisions.
Before joining the company, he held senior positions at UBS and Salomon Brothers and was co-founder and CEO of PrinceRidge.
Hutchins brings a “deep understanding of every aspect of Freddie Mac,” and his “experience in housing and financial services is invaluable as the company navigates a challenging market,” said Lance Drummond, non-executive board chair.
Drummond, who became the chair of the board of directors in February after Sara Mathew’s retirement, added that the company will continue “a thorough search for a permanent CEO.”
Hutchins will lead a company that reported a full-year profit of $10.5 billion in 2023, representing a 13% year-over-year increase.
The government-sponsored enterprise (GSE) financed 955,000 mortgages last year, with 56% of eligible loans deemed affordable to low- and moderate-income families. It enabled 375,000 first-time buyers to purchase a home. Freddie Mac also financed 447,000 rental units, with 92% of eligible units labeled as affordable to low- and moderate-income families.
The Biden Administration has just unveiled a number of proposals to make homeownership more affordable.
Aside from legislation to build and renovate more than two million homes, they are calling on Congress to approve a pair of new “mortgage relief credits.”
One targets prospective home buyers grappling with significantly higher mortgage rates, while the other addresses home sellers dealing with mortgage rate lock-in.
Both are intended to increase the supply of homes for sale, which has been below healthy levels for several years now.
The question remains whether incentivizing home buying is what’s necessary for the housing market at the moment.
$5,000 Tax Credit for Two Years for First-Time Home Buyers
The mortgage relief that targets home buyers would provide a tax credit of $5,000 for two years to first-time home buyers.
Generally, this is defined as someone without ownership interest in the three years preceding the home purchase.
In total, these new home buyers could snag $10,000 in tax savings over the first two years.
A tax credit directly reduces your tax bill, unlike a deduction, which simply reduces your taxable income.
This piece of legislation is intended to tackle the high mortgage rates currently available, which nearly tripled from below 3% to above 8% recently.
Per the White House fact sheet, the $10,000 in savings is the equivalent of reducing the borrower’s mortgage rate by more than 1.5 percentage points on a median-priced home.
At last glance, the median home was valued at roughly $418,000. Of course, these savings only exist for two years. More on that in a moment.
The Biden administration believes this credit could help more than 3.5 million middle-class families purchase their very first home over the next two years.
$10,000 Tax Credit for Home Sellers
The other mortgage relief credit would incentivize home sellers, many of whom have been reluctant to sell because of their very cheap mortgages.
Known as the mortgage rate lock-in effect, it’s the concept of staying put for fear of losing your existing mortgage rate if you move. And having to replace it with a much higher one.
To offset this lock-in effect, middle-class families who sell their “starter home” to another owner-occupant would receive a tax credit of up to $10,000.
They define a starter home as one valued below the area median home price in the county where it’s located.
The Biden administration thinks this could unlock homes that no longer fit the needs of many households nationwide, and help an estimated three million families i the process.
On top of these tax credits, they are still pushing for $25,000 in down payment assistance to first-generation home buyers.
And they’re targeting the elimination of certain closing costs, such as lender’s title insurance, which could save the average homeowner $750 when refinancing.
But Won’t This Just Increase Demand at a Time When Supply Is Already Too Low?
While the new proposals might be well-intentioned, one has to wonder if they won’t simply stoke demand at a time when supply remains far too low.
Sure, there’s an incentive to both buy and sell a home with these tax credits, but it’s unclear how many existing owners would sell just to get the $10,000 tax credit.
After all, if they’re sitting on a 2-3% 30-year fixed mortgage rate, it wouldn’t take long for the $10,000 to be absorbed via their new, much higher housing costs.
Just pretend a family holds a $300,000 mortgage set at 2.75%. Their monthly principal and interest payment is $1,224.72.
If they sold and then bought another property for say $400,000 with a rate of 6.5%, their new monthly P&I would be $2,528.27.
That’s a difference of over $1,300 per month, which would eat up the $10,000 credit in less than eight months!
These sellers would also have to incur moving costs, closing costs on a new mortgage, and compete with other home buyers to find a replacement property.
The credit for first-time home buyers could also arguably result in hotter demand, even if more homes were coming online.
Lastly, it seems they’re banking on lower mortgage rates in the near future, at which point these first-time buyers would be able to get more permanent savings beyond year two via a rate and term refinance.
In the end, it appears we’re stuck between a rock and a hard place. Ultimately, the accommodative interest rate policy of the past decade created a serious divide of haves and have nots.
And without a lot more inventory, or perhaps slightly lower mortgage rates that allow transactions to occur naturally again, it might be a while before things normalize again.
Recent swings in mortgage rates are helping to drag down contract signings, which fell 5% in January, the National Association of REALTORS® reported this week. Pending home sales, a forward-looking indicator of housing activity based on contract signings, were down 8.8% compared to a year earlier.
“The job market is solid, and the country’s total wealth reached a record high due to stock market and home price gains,” says NAR Chief Economist Lawrence Yun. “This combination of economic conditions is favorable for home buying. However, consumers are showing extra sensitivity to changes in mortgage rates in the current cycle, and that’s impacting home sales.”
In recent weeks, mortgage rates have started creeping back toward 7%. Freddie Mac reports the 30-year fixed-rate mortgage averaged 6.94% this week, marking a two-month high. “While this is still below the rates seen in the fall of 2023, it impacts home buyers’ excitement about entering a spring market,” says NAR Deputy Chief Economist Jessica Lautz. The monthly mortgage payment for a $400,000 home, assuming a 20% down payment, now translates to about $2,116, Lautz adds. “For first-time buyers who are the most price-sensitive, the rise in mortgage rates poses a cause for concern, as they may be priced out of the market.”
Indeed, “the recent boomerang in rates has dampened already tentative homebuyer momentum as we approach the spring, a historically busy season for home buying,” adds Sam Khater, Freddie Mac’s chief economist. “While sales of newly built homes are trending in a positive direction, higher rates and elevated prices continue to pose affordability challenges that may leave potential home buyers on the sidelines.”
Freddie Mac reports the following national averages with mortgage rates for the week ending Feb. 29:
30-year fixed-rate mortgages: averaged 6.94%, rising from last week’s 6.9% average. A year ago, 30-year rates averaged 6.65%.
15-year fixed-rate mortgages: averaged 6.26%, dropping slightly from last week’s 6.29% average. Last year at this time, 15-year rates averaged 5.89%.
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How to get the best mortgage rates and deals
Mortgage rates vary depending on the type of mortgage you’re looking for, your financial situation and your credit score. But when we talk about getting the best mortgage rate, it’s important to find the best rate among the mortgage deals that suit you and your circumstances.
Mortgage fees and the features you want in a mortgage should always be considered alongside the mortgage rate when making mortgage comparisons and shopping around for any mortgage deal.
If you’re in any way unsure or want help finding the best mortgage deal for you we recommend you seek mortgage advice.
Are mortgage rates going down?
Mortgage rates have mainly been rising in the past week, continuing the upward trend seen during much of February. The average rate on two-year fixed-rate mortgages increased to 5.15% in the week to 28 February, rising from 5.08% a week earlier, according to Rightmove. At the same time, the average rate on five-year fixed-rate mortgages increased to 4.80%, up from 4.72%.
Many of the big UK lenders have increased the cost of their fixed-rate mortgages in recent weeks. However, average rates remain lower than at the beginning of the year, due to the significant rate cuts seen during the mortgage rate price war in January.
Some experts are predicting that more mortgage rate rises may be on the way. This is mainly because of expectations that the Bank of England base rate may need to stay higher for longer, to get inflation down.
What are current UK mortgage rates?
The average two-year fixed-rate mortgage rate, if you have a 25% deposit or equity, increased to 4.99% over the past week, up from 4.90%, while the average rate on a similar five-year fixed-rate mortgage rose to 4.70%, from 4.61%. If you have a smaller deposit or equity of 5%, the average two-year fixed rate remained unchanged at 5.79%, while the average five-year rate increased to 5.38%, from 5.35%. All rates are according to Rightmove as at 28 February 2024.
Latest average two-year fixed-rate mortgage rates
Loan to value (LTV)
21 February 2024
28 February 2024
Week-on-week change
⇩ ⇧
60% LTV
4.50%
4.62%
+0.12%
⇧
75% LTV
4.90%
4.99%
+0.09%
⇧
85% LTV
5.08%
5.14%
+0.06%
⇧
90% LTV
5.31%
5.38%
+0.07%
⇧
95% LTV
5.79%
5.79%
No change
⇔
Latest average five-year fixed-rate mortgage rates
Loan to value (LTV)
21 February 2024
28 February 2024
Week-on-week change
⇩ ⇧
60% LTV
4.19%
4.30%
+0.11%
⇧
75% LTV
4.61%
4.70%
+0.09%
⇧
85% LTV
4.67%
4.73%
+0.06%
⇧
90% LTV
4.86%
4.93%
+0.07%
⇧
95% LTV
5.35%
5.38%
+0.03%
⇧
Data sourced from Rightmove/Podium. Correct as at 28 February 2024.
Average rates are based on 95% of the mortgage market and products with a fee of around £999.
What mortgage do I need?
If you’re looking for a mortgage, you’ll usually fall into one of the following categories of mortgage borrower.
If you’ve never owned a home before, you’ll usually need a first-time buyer mortgage. Knowing that you’re just starting out, the deposit requirements on most first-time buyer mortgages are generally small. You should also be able to find mortgage deals where upfront fees are kept to a minimum. However, mortgage rates for first-time buyers tend to be higher than if you’re already on the property ladder. This is because you’re likely to require a larger loan relative to the value of your property – so borrow at a higher loan-to-value (LTV) – making you a riskier proposition in the eyes of lenders. As it’s your first mortgage, lenders also have less to go on when trying to assess your reliability as a mortgage borrower.
If you already have a mortgage but want to switch to a new one, you are looking to remortgage. You may want to remortgage because your current fixed-rate or discounted term is at an end and you don’t want to move on to your lender’s standard variable rate (SVR), which may be higher. Other reasons you may remortgage include to raise funds to pay for home improvements, or because falling interest rates or a rise in the value of your home means remortgaging could save you money. If you’ve built equity in your property since taking out your current mortgage, it may be possible to borrow at a lower LTV for your new mortgage – and the lower your LTV, the lower mortgage rates tend to be.
If you already have a mortgage but are moving home, you may be able to take your current mortgage with you – this is called porting. Alternatively, you may want to arrange a new mortgage altogether, either with your current lender or a different one. Whichever option you’re considering, it’s important to weigh up the costs of either porting or exiting your existing deal, along with any potential fees you may need to pay on a new mortgage deal.
If you’re buying a property to rent out to tenants, you’ll be looking for a buy-to-let mortgage. You’ll normally need a larger deposit for a buy-to-let mortgage than you would for a residential mortgage, and buy-to-let mortgage rates tend to be higher too. Lenders will also want to see that the rental income you expect to receive will more than cover your monthly repayments.
How mortgage rates work
Mortgage rates are the interest rate you pay to a lender on the mortgage balance you have outstanding. The lower your mortgage rate, the lower your monthly mortgage repayments tend to be, and vice versa.
Different types of mortgage
The type of mortgage you take out can affect the mortgage rate you pay, and whether it may change going forward.
Fixed-rate mortgage
A fixed-rate mortgage guarantees that your mortgage rate, and therefore your monthly repayments, won’t change during the set fixed-rate period that you choose.
This can help with budgeting and means you are protected against a rise in mortgage costs if interest rates begin to increase. However, you’ll miss out if interest rates start to fall while you are locked into a fixed-rate mortgage.
Variable rate mortgages
With a variable rate mortgage, your mortgage rate has the potential to rise and fall and take your monthly repayments with it. This may work to your advantage if interest rates decrease, but means you’ll pay more if rates increase. Variable rate mortgages can take the form of:
a tracker mortgage, where the mortgage rate you pay is typically set at a specific margin above the Bank of England base rate, and will automatically change in line with movements in the base rate.
a standard variable rate, or SVR, which is a rate set by your lender that you’ll automatically move on to once an initial rate period, such as that on a fixed-rate mortgage, comes to an end. SVRs tend to be higher than the mortgage rates on other mortgages, which is why many people look to remortgage to a new deal when a fixed-rate mortgage ends.
a discount mortgage, where the rate you pay tracks a lender’s SVR at a discounted rate for a fixed period.
Offset mortgages
With an offset mortgage, your savings are ‘offset’ against your mortgage amount to reduce the interest you pay. You can still access your savings, but won’t receive interest on them. Offset mortgages are available on either a fixed or variable rate basis.
Interest-only mortgages
An interest-only mortgage allows you to make repayments that cover the interest you’re charged each month but won’t pay off any of your original mortgage loan amount. This helps to keep monthly repayments low but also requires that you have a repayment strategy in place to pay off the full loan amount when your mortgage term ends. Interest-only mortgages can be arranged on either a fixed or variable rate.
» MORE: Should I get an interest-only or repayment mortgage?
How rate changes could affect your mortgage payments
Depending on the type of mortgage you have, changes in mortgage rates have the potential to affect monthly mortgage repayments in different ways.
Fixed-rate mortgage
If you’re within your fixed-rate period, your monthly repayments will remain the same until that ends, regardless of what is happening to interest rates generally. It is only once the fixed term expires that your repayments could change, either because you’ve moved on to your lender’s SVR, which is usually higher, or because you’ve remortgaged to a new deal, potentially at a different rate.
Tracker mortgage
With a tracker mortgage, your monthly repayments usually fall if the base rate falls, but get more expensive if it rises. The change will usually reflect the full change in the base rate and happen automatically, but may not if you have a collar or a cap on your rate. A collar rate is one below which the rate you pay cannot fall, while a capped rate is one that your mortgage rate cannot go above.
Standard variable rate mortgage
With a standard variable rate mortgage, your mortgage payments could change each month, rising or falling depending on the rate. SVRs aren’t tied to the base rate in the same way as a tracker mortgage, as lenders decide whether to change their SVR and by how much. However, it is usually a strong influence that SVRs tend to follow, either partially or in full.
» MORE: How are fixed and variable rate mortgages different?
Mortgage Calculators
Playing around with mortgage calculators is always time well-spent. Get an estimate of how much your monthly mortgage repayments may be at different loan amounts, mortgage rates and terms using our mortgage repayment calculator. Or use our mortgage interest calculator to get an idea of how your monthly repayments might change if mortgage rates rise or fall.
Can I get a mortgage?
Mortgage lenders have rules about who they’ll lend to and must be certain you can afford the mortgage you want. Your finances and circumstances are taken into account when working this out.
The minimum age to apply for a mortgage is usually 18 years old (or 21 for a buy-to-let mortgage), while there may also be a maximum age you can be when your mortgage term is due to end – this varies from lender to lender. You’ll usually need to have been a UK resident for at least three years and have the right to live and work in the UK to get a mortgage.
Checks will be made on your finances to give lenders reassurance you can afford the mortgage repayments. You’ll need to provide proof of your earnings and bank statements so lenders can see how much you spend. Any debts you have will be considered too. If your outgoings each month are considered too high relative to your monthly pay, you may find it more difficult to get approved for a mortgage.
Lenders will also run a credit check to try and work out if you’re someone they can trust to repay what you owe. If you have a good track record when it comes to managing your finances, and a good credit score as a result, it may improve your chances of being offered a mortgage.
If you work for yourself, it’s possible to get a mortgage if you are self-employed. If you receive benefits, it can be possible to get a mortgage on benefits.
Mortgages for bad credit
It may be possible to get a mortgage if you have bad credit, but you’ll likely need to pay a higher mortgage interest rate to do so. Having a bad credit score suggests to lenders that you’ve experienced problems meeting your debt obligations in the past. To counter the risk of problems occurring again, lenders will charge you higher interest rates accordingly. You’re likely to need to source a specialist lender if you have a poor credit score or a broker that can source you an appropriate lender.
What mortgage can I afford?
Getting an agreement or decision in principle from a mortgage lender will give you an idea of how much you may be allowed to borrow before you properly apply. This can usually be done without affecting your credit score, although it’s not a definite promise from the lender that you will be offered a mortgage.
You’ll also get a good idea of how much mortgage you can afford to pay each month, and how much you would be comfortable spending on the property, by looking at your bank statements. What is your income – and your partner’s if it’s a joint mortgage – and what are your regular outgoings? What can you cut back on and what are non-negotiable expenses? And consider how much you would be able to put down as a house deposit. It may be possible to get a mortgage on a low income but much will depend on your wider circumstances.
» MORE: How much can I borrow for a mortgage?
Joint mortgages
Joint mortgages come with the same rates as those you’ll find on a single person mortgage. However, if you get a mortgage jointly with someone else, you may be able to access lower mortgage rates than if you applied on your own. This is because a combined deposit may mean you can borrow at a lower LTV where rates tend to be lower. Some lenders may also consider having two borrowers liable for repaying a mortgage as less risky than only one.
The importance of loan to value
Your loan-to-value (LTV) ratio is how much you want to borrow through a mortgage shown as a percentage of the value of your property. So if you’re buying a home worth £100,000 and have a £10,000 deposit, the mortgage amount you need is £90,000. This means you need a 90% LTV mortgage.
The LTV you’re borrowing at can affect the interest rate you’re charged. Mortgage rates are usually lower at the lowest LTVs when you have a larger deposit.
What other mortgage costs, fees and charges should you be aware of?
It’s important to take into account the other costs you’re likely to face when buying a home, and not just focus on the mortgage rate alone. These may include:
Stamp duty
Stamp duty is a tax you may have to pay to the government when buying property or land. At the time of publication, if you’re buying a residential home in England or Northern Ireland, stamp duty only becomes payable on properties worth over £250,000. Different thresholds and rates apply in Scotland and Wales, and if you’re buying a second home. You may qualify for first-time buyer stamp duty relief if you’re buying your first home.
» MORE: Stamp duty calculator
Mortgage deposit
Your mortgage deposit is the amount of money you have available to put down upfront when buying a property – the rest of the purchase price is then covered using a mortgage. Even a small deposit may need to be several thousands of pounds, though if you have a larger deposit this can potentially help you to access lower mortgage rate deals.
Mortgage fees
Among the charges and fees which are directly related to mortgages, and the process of taking one out, you may need to pay:
Sometimes also referred to as the completion or product fee, this is a charge paid to the lender for setting up the mortgage. It may be possible to add this on to your mortgage loan although increasing your debt will mean you will be charged interest on this extra amount, which will increase your mortgage costs overall.
This is essentially a charge made to reserve a mortgage while your application is being considered, though it may also be included in the arrangement fee. It’s usually non-refundable, meaning you won’t get it back if your application is turned down.
This pays for the checks that lenders need to make on the property you want to buy so that they can assess whether its value is in line with the mortgage amount you want to borrow. Some lenders offer free house valuations as part of their mortgage deals.
You may want to arrange a house survey so that you can check on the condition of the property and the extent of any repairs that may be needed. A survey should be conducted for your own reassurance, whereas a valuation is for the benefit of the lender and may not go into much detail, depending on the type requested by the lender.
Conveyancing fees cover the legal fees that are incurred when buying or selling a home, including the cost of search fees for your solicitor to check whether there are any potential problems you should be aware of, and land registry fees to register the property in your name.
Some lenders apply this charge if you have a small deposit and are borrowing at a higher LTV. Lenders use the funds to buy insurance that protects them against the risk your property is worth less than your mortgage balance should you fail to meet your repayments and they need to take possession of your home.
If you get advice or go through a broker when arranging your mortgage, you may need to pay a fee for their help and time. If there isn’t a fee, it’s likely they’ll receive commission from the lender you take the mortgage out with instead, which is not added to your costs.
These are fees you may have to pay if you want to pay some or all of your mortgage off within a deal period. Early repayment charges are usually a percentage of the amount you’re paying off early and tend to be higher the earlier you are into a mortgage deal.
Government schemes to help you buy a home
There are several government initiatives and schemes designed to help you buy a home or get a mortgage.
95% Mortgage Guarantee Scheme
The mortgage guarantee scheme aims to persuade mortgage lenders to make 95% LTV mortgages available to first-time buyers with a 5% deposit. It is currently due to finish at the end of June 2025.
Shared Ownership
The Shared Ownership scheme in England allows you to buy a share in a property rather than all of it and pay rent on the rest. Similar schemes are available in Scotland, Wales and Northern Ireland.
Help to Buy
The Help to Buy equity loan scheme, designed to help buyers with a smaller deposit, is still available in Wales, but not in England, Scotland and Northern Ireland.
Forces Help to Buy
The Forces Help to Buy Scheme offers eligible members of the Armed Forces an interest-free loan to help buy a home. The loan is repayable over 10 years.
First Homes Scheme
Eligible first-time buyers in England may be able to get a 30% to 50% discount on the market value of certain properties through the First Homes scheme.
Right to Buy
Under this scheme, eligible council tenants in England have the right to buy the property they live in at a discount of up to 70% of its market value. The exact discount depends on the length of time you’ve been a tenant and is subject to certain limits. Similar schemes are available in Wales, Scotland and Northern Ireland, while there is also a Right to Acquire scheme for housing association tenants.
Lifetime ISAs
To help you save for a deposit, a Lifetime ISA will see the government add a 25% bonus of up to £1,000 per year to the amount you put aside in the ISA.
How to apply for a mortgage
You may be able to apply for a mortgage directly with a bank, building society or lender, or you may need or prefer to apply through a mortgage broker. You’ll need to provide identification documents and proof of address, such as your passport, driving license or utility bills.
Lenders will also want to see proof of income and evidence of where your deposit is coming from, including recent bank statements and payslips. It will save time if you have these documents ready before you apply.
» MORE: Best mortgage lenders
Would you like mortgage advice?
Taking out a mortgage is one of the biggest financial decisions you’ll ever make so it’s important to get it right. Getting mortgage advice can help you find a mortgage that is suitable to you and your circumstances. It also has the potential to save you money.
If you think you need mortgage advice, we’ve partnered with online mortgage broker London & Country Mortgages Ltd (L&C) who can offer you fee-free advice.
Key mortgage terms explained
Loan to value (LTV)
Your loan-to-value ratio is the amount you wish to borrow through a mortgage expressed as a percentage of the value of the property you’re buying.
Initial interest rate
This is the interest rate you’ll pay when you’re still within the initial fixed-rate period of a mortgage deal.
Initial interest rate period
This is the period of time your initial interest rate will last, before your lender switches you over to its SVR.
Annual Percentage Rate of Charge (APRC)
The APRC is a single percentage figure designed to help you compare the annual cost of different mortgage deals.
Annual overpayment allowance (AOA)
This is the amount a lender will let you overpay on your mortgage each year without being charged a fee.
Early Repayment Charge (ERC)
This is a charge you may need to pay if you want to pay off some or all of your mortgage earlier than you agreed with your lender.
Mortgage term
A mortgage term is the full period of time over which the mortgage contract is taken out for – it should not be confused with the deal term. At the end of the term you will have paid off the full debt or all of the interest depending on what type of mortgage you took.
The current average rate on a five-year fixed-rate mortgage for a 10% deposit or equity is 4.93%, up from 4.86% a week earlier. For an equivalent two-year fixed-rate mortgage, the average rate of 5.38% has increased from 5.31%. If you have a 40% deposit/equity, the average five-year fixed rate is 4.30%, up from 4.19% a week earlier, while the average two-year fixed rate is 4.62%, rising from 4.50%. All rates are according to Rightmove as at 28 February 2024.
A mortgage rate is the interest rate a lender charges on the mortgage amount that you borrow. Mortgage interest rates may be fixed, guaranteeing that they will remain the same for a certain length of time, or variable, meaning it may fluctuate.
Mortgage providers regularly review the mortgage rates that they offer to take into account the costs involved with funding its lending activities, their latest priorities in terms of target borrowers, and wider conditions in the market. As a result, when searching for a new mortgage, it’s always a good idea to consider various lenders and take the time to compare different mortgages. Crucially, you need to bear in mind that a deal offering the best mortgage rate may not necessarily be the one that is most suitable for you. The mortgage rate is important, but at the same time, you need to consider other factors, such as the charges and fees attached to a mortgage, the type of mortgage that you need, and the mortgage term that you want.
While mortgage rates have been rising in recent weeks, many commentators still expect to see mortgage rates fall across 2024 as a whole.
The next move in the Bank of England base rate, which currently sits at 5.25%, is widely forecast to be down. But with inflation remaining unchanged in January, and wage growth easing by less than expected, some experts predict the first rate cut may not be made until September. Towards the end of 2023, some believed the rate could begin falling in March.
The uncertainty makes it even more difficult than usual to predict what may happen to mortgage rates next.
The interest rate is the percentage of a loan amount that a lender charges for borrowing money, whereas the APRC, or annual percentage rate of charge, is a calculation expressed as a percentage that takes into account both the interest rate and associated costs of a mortgage across its lifetime. The aim of the APRC is to help borrowers make meaningful comparisons between mortgage deals.
Taking the time to compare mortgage rates and deals, making sure your credit score is in good shape, saving for a larger deposit and paying off existing debts can all help improve your chances of getting a good mortgage deal.
When looking for a mortgage it is vital that you compare mortgage lenders and the rates and deals on offer. Taking the time to carry out a mortgage comparison can improve your chances of finding the best mortgage for your circumstances.
A mortgage is a loan you take out to help you buy a property you don’t have the money to pay for up front. You may be a first-time buyer, remortgaging, securing a buy to let, or moving to your next home. The amount you need to borrow will depend on the purchase price of the property, and how much you can put down as a deposit or already hold in equity in your current property. The mortgage is secured against the property, which means your home is at risk if you don’t meet the repayments.
With a capital repayment mortgage, your monthly repayments pay off your interest and some of your original loan amount each month, so that everything should be paid off by the time you reach the end of your mortgage term. The alternative to a repayment mortgage is an interest-only mortgage, where you will repay only the interest each month before needing to pay off your original loan amount in its entirety at the end of the mortgage term.
A mortgage term is the period of time you agree with a lender over which you intend to entirely pay off your mortgage and interest. A typical mortgage term in the UK is usually considered to be 25 years, but you may opt for a shorter period or a longer one, if allowed. Some lenders offer mortgage terms of up to 40 years. If you have a longer term, your monthly repayments will be lower, but you’ll pay more interest overall.
The cost of your mortgage will depend on many factors, including how much you borrow, the size of your deposit, the length of your mortgage term, the mortgage rate you’re paying, and whether you can afford to make overpayments. Your mortgage lender must provide you with the full cost of the mortgage before you apply.
» MORE: How much could your mortgage cost you?
Besides making sure your monthly repayments are affordable, there are many other costs associated with arranging a mortgage. These may include arrangement, survey, valuation and mortgage broker fees.
If you’ve previously owned a home and the property you’re buying is worth more than £250,000, stamp duty will be payable as well; if you’re a first-time buyer, stamp duty only becomes payable on properties worth over £425,000.
To get a mortgage as a first-time buyer you’ll usually need at least a 5% deposit and a regular income. Most lenders offer first-time buyer mortgages aimed primarily at those with smaller deposits. First-time buyers may also be able to secure a mortgage with the help of close relatives through a guarantor mortgage.
Some lenders offer buy-to-let mortgages that can be arranged on a property you want to rent out to a tenant, rather than live in yourself. You’ll usually need a larger deposit for a buy-to-let mortgage than for a residential mortgage, and interest rates are often higher. You may also need to already own your own home or have a residential mortgage on another property.
It may be possible to get a mortgage with bad credit but you’ll probably have fewer mortgage deals to choose from and need to pay higher mortgage rates.
You may want to consider remortgaging if your initial fixed-rate period is close to ending and you want to avoid moving on to your lender’s SVR. Choosing to remortgage has the potential to save you money if you find the right mortgage deal.
» MORE: How remortgaging works
It’s always important to think about your plans, particularly when it comes to choosing the type of mortgage that will suit you best. For instance, if you plan to move in perhaps two years, choosing a five-year fixed-rate mortgage may mean you have to pay early repayment charges if you need to get a new mortgage.
Getting an agreement in principle, or AIP, from a lender will give you an idea of how much you may be able to borrow for your mortgage without needing to formally apply. Getting an AIP usually involves a soft credit check, which shouldn’t affect your credit score. However, having an AIP does not guarantee that a lender will offer you a mortgage. An agreement in principle is also sometimes referred to as a decision in principle or a mortgage promise.
Yes, some providers offer halal or Islamic mortgages in the UK. These are compliant with Sharia law and allow people to borrow but not pay interest.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a loan or any other debt secured on it.
Information on this page is a guide. It does not constitute advice, recommendation or suitability to your needs or financial circumstances. Seek qualified mortgage advice before proceeding with a mortgage product.
NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products and services are presented without warranty. When evaluating products, please review the financial institution’s Terms and Conditions.
Joaquin Arambula, a Democratic assemblyman from California, introduced Assembly Bill 1840 earlier this year, which could create an alternative way for illegal immigrants to achieve homeownership.
The bill is set to expand eligibility criteria for a state loan program to expand these loans to include undocumented migrants that are first-time buyers.
Arambula’s update to the bill states, “an applicant under the program shall not be disqualified solely based on the applicant’s immigration status.”
BILL MELUGIN: ‘WHAT HAPPENS AT THE BORDER NO LONGER STAYS HERE’
Migrants attempt to cross in to the U.S. from Mexico at the border on December 17, 2023 in Jacumba Hot Springs, California. Asylum seekers are stuck in makeshift camps in the extreme climate of the US-Mexico border. (Photo by Nick Ut/Getty Images)
“It’s that ambiguity for undocumented individuals, despite the fact that they’ve qualified under existing criteria, such as having a qualified mortgage [that] underscores the pressing need for us to introduce legislation,” Arambula told the LA Times.
The bill focuses on the California Dream for All Shared Appreciation Loans program, which launched spring of 2023 to give qualifying first-time home buyers a loan that covers up to 20% of a property’s purchase price that will not accumulate interest or have required monthly payments. Loanees are instead expected to pay back the original loan amount in addition to 20% of the increase in the home’s value when the property’s mortgage is refinanced or resold.
First introduced on January 16th, Bill 1840 was originally intended to “provide shared appreciation loans” to low and middle income citizens. Under Arambula’s new proposal, the legislation would expand to allow the program to include illegal immigrants into the eligibility pool.
Arambula sent Fox News Digital a statement saying how the bill will address the uncertainty of the eligibility for undocumented indviduals.
“The California Dream for All program already exists – it was established to assist low- and middle-income individuals to purchase homes. But the program hasn’t been clear about eligibility for undocumented individuals, and AB 1840 addresses that issue. Let me be clear: anyone who meets the program’s criteria can apply for this loan program. And, to qualify, you must secure a bank loan or mortgage,” the statement said. “AB 1840 is about providing an opportunity for homeownership, which we know allows families to secure financial security and stability. The ability to do this strengthens local economies, and that benefits all people who call California home.”
TRUMP: ‘THIS IS A JOE BIDEN INVASION’
A U.S. Border Patrol agent talks with asylum-seekers waiting between the double fence along the U.S.-Mexico border near Tijuana, Mexico, Monday, May 8, 2023, in San Diego. The migrants wait between the fences to be processed by U.S. Border Patrol agents. (Denis Poroy)
The LA Times reported the California loan program garnered 2,300 applicants in less than two weeks last year before the program’s applications were halted, and that “the program will replace its first-come, first-serve basis with a lottery.”
Concerns continue to rise across the country as the migrant crisis continues to grow and overpower different states’ available resources.
The new Senate border bill that was introduced earlier this month before subsequently failing to gather enough support, was at the forefront of Biden’s priorities during his recent visit to the border.
“Folks, the bipartisan border security bill is a win for the American people and a win for the people of Texas, and it’s fair for those who legitimately have a right to come here,” Biden stated.
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President Joe Biden and National Border Patrol Council President Brandon Judd.(Getty Images)
National Border Patrol Council (NBCP) President Brandon Judd, who was present at former President Trump’s visit to the border in Eagle Pass, TX, relayed his sentiments towards the ongoing migrant crisis.
“Border patrol agents are upset that we cannot get the proper policy that is necessary to protect human life, to protect American citizens, to protect the people that are crossing the border illegally. We can’t do that because President Biden’s policies continue to invite people to cross here,” Judd said.
The artic was updated to include a statement from State Rep. Arambula.
Alba Cuebas-Fantauzzi is a freelance production assistant at Fox News Digital.
Images by GettyImages; Illustration by Hunter Newton/Bankrate
More than half of aspiring homeowners say living costs are too high or their incomes are too low to squeeze a down payment and closing costs into their budgets, according to Bankrate’s new Down Payment Survey.
Reflecting the bout of inflation that swept through the economy in 2022 and 2023, fully 51 percent of would-be homeowners say the cost of living poses an obstacle to their home-buying plans. Meanwhile, 54 percent of Americans say their incomes haven’t kept pace with home prices that are flirting with record levels.
“With so many aspiring homeowners saying they’re not making enough money to afford a down payment, the job market has been more resilient, the economy more robust than many experts expected,” says Mark Hamrick, Bankrate’s chief economic analyst. “That strength can still be leveraged.”
Bankrate’s key takeaways
Myriad financial challenges vex would-be buyers. In addition to the high cost of living and low income, aspiring homeowners cited these barriers to homeownership: credit card debt (18 percent); friends or family not being able to provide financial assistance (15 percent); and student loan debt (10 percent).
Saving up could take a long time. Fully 20 percent of aspiring homeowners think they will never be able to save enough to purchase a home. Just 7 percent say they’ll be ready in less than a year.
Successful buyers were intentional about achieving their goal. More than four in 10 current homeowners (41 percent) saved specifically for the down payment and closing costs on their first homes, and 14 percent got down payment assistance or a first-time buyer grant.
Americans’ housing outlook is growing less gloomy. Overall, 42 percent believe now is a bad time to buy a home, a decrease from 49 percent in September 2023.
Many say high living costs, constrained incomes pose challenges
More than half of aspiring homeowners say the current cost of living is too high or their income is not high enough for them to afford a down payment and closing costs for a home (51 percent and 54 percent, respectively).
In addition to the high cost of living and low income, aspiring homeowners cited credit card debt (18 percent), friends or family not being able to provide financial assistance (15 percent) and student loan debt (10 percent) as barriers to homeownership, while 8 percent cited some other reason. Just 13 percent of aspiring homeowners said nothing is holding them back.
Younger aspiring homeowners are more likely to point to a lack of financial assistance from friends or family as obstacles to homeownership compared to older generations, while millennials are most likely to point to both credit card and student loan debt.
Aspiring homeowners not hopeful they’ll be able to afford to buy in near future
Fully 20 percent of aspiring homeowners think they will never be able to save enough to purchase a home. Older generations (36 percent of baby boomers and 28 percent of Gen Xers) are more likely to believe they will never be able to save enough to buy a home, compared to 18 percent of millennials and 10 percent of Gen Zers.
Nearly one-third of aspiring homeowners (30 percent) say it will take at least five years or longer to save enough money for a home, while 10 percent say it will take a decade or more.
Americans more optimistic about housing market
Overall, 42 percent believe now is a bad time to buy a home, a decrease from 49 percent in a September 2023 Bankrate survey.
Among other housing market headwinds, nearly two in five (39 percent) say they think mortgage rates will remain elevated for the foreseeable future, while 38 percent say a buyer needs excellent credit to get a mortgage and 17 percent say that renting is cheaper than buying a home.
Current homeowners got there through intentional savings
When asked how they came up with the cash for their first homes, 41 percent of current homeowners saved specifically for that purpose, 14 percent received a gift from family or friends and another 14 percent used a first-time homebuyers grant or loan assistance program. Nine percent received a loan from family or friends, while another 9 percent took money out of retirement savings. Fewer homeowners found additional income streams (8 percent) or sold some personal items such as jewelry, electronics or cars (7 percent).
3 ways to save for a down payment
Leverage a savings account. Although mortgage rates have increased, the rates on savings accounts have gone up, too. Look into high-yield or money market accounts, or even a certificate of deposit, to take advantage of these returns.
Don’t sweat 20 percent. While 20 percent is an ideal amount to put down, the reality is that the typical home price nationally is close to $400,000, and most first-time buyers don’t have $80,000 to devote to the down payment. The good news is that there are plenty of loans available for borrowers with as little as 3 percent to 3.5 percent for the down payment.
Tap into first-time buyer programs. Nearly every state in the country has a program to help first-time buyers become homeowners. These programs typically feature some sort of down payment assistance.
FAQ
Because of the combination of high home prices and still-high mortgage rates, fewer Americans than usual are buying homes. Don’t wait too long, though: If mortgage rates decline significantly in 2024, that shift would lure more buyers into the market, creating more competition and upward pressure on home prices.
No. While the best mortgage offers are available to borrowers with credit scores of 740 or higher, that’s not a requirement. Mortgages are available to borrowers with credit scores as low as 580, although those loans typically carry higher costs.
The current consensus is that mortgage rates will fall to 6 percent or below by the end of 2024. A lot can happen between now and then, however — much depends on the direction of the economy and when the Federal Reserve decides to cut interest rates.
Bankrate commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,267 U.S. adults, of which 864 are aspiring/prospective homeowners. Fieldwork was undertaken between Jan. 24-26, 2024. The survey was carried out online and meets rigorous quality standards. It employed a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results. For this survey, Bankrate defined aspiring/prospective homeowners as those who have owned a home in the past but currently do not, and those who have never owned a home in the past but hope to someday.