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partnership, two people shaking hands, merger and acquisition

New York Community Bancorp, the parent of Flagstar Bank, said it’s still committed to the home loan business despite selling approximately $5 billion in warehouse mortgages to JPMorgan Chase Bank to improve its capital and liquidity position.

Following the transaction, Flagstar will exit the mortgage warehouse lending space. However, it will continue financing mortgage servicing rights (MSR). Inside Mortgage Finance (IMF) first reported on the topic and a Flagstar spokesperson confirmed.

On Tuesday, NYCB said it entered into a commitment letter with JPMorgan. The transaction is subject to due diligence, negotiation of definitive terms and other closing conditions. The sale is expected to close in the third quarter of 2024.

“The mortgage business remains an important business for the company and we will continue to provide our mortgage customers and partners the same great service that they have come to expect from Flagstar,” Joseph Otting, NYCB president and CEO, said in a statement.

JPMorgan was the leader in the mortgage warehouse space in the fourth quarter of 2023, with $20 billion in volume and a 20.8% market share, according to IMF estimates.

The bank was followed by Flagstar, with $11.8 billion in volume and a 12.3% market share, the IMF data shows. The top- five is rounded out by Merchants Bank ($6.7 billion; 7%), EverBank ($5.8 billion; 6%) and First Horizon ($5.5 billion; 5.7%).

Loans at mortgage warehouse lending, a source of liquidity to independent mortgage bankers (IMB), have good yields, short terms and are highly secured and collateralized.

But they are not immune to systemic industry shocks, including last year’s bank crisis. Following the tumult, warehouse lenders – such as Dallas-based Comerica Bank – have decided to exit the business.

NYCB, which acquired Flagstar Bank in December 2022, ended up rescuing Signature Bank in March 2023. However, it affected its capital and liquidity structures amid a challenging market condition.

In January 2024, the bank suffered a confidence crisis after reporting a net loss in the last quarter of 2023 due to a provision for loan losses of $552 million, mainly impacted by its exposure to commercial real estate loans.

Fitch and Moody’s downgraded NYCB’s debt ratings on March 1, as the company disclosed internal control deficiencies and a $2.4 billion goodwill impairment. On March 6, the company received $1 billion in equity investment, led by former U.S. Department of Treasury Secretary Steven Mnuchin’s private equity firm, Liberty Strategic Capital.

“Consistent with my guidance during our recent earnings call, we are moving forward quickly to implement our strategic plan, which focuses on improving our capital, liquidity and loan-to-deposit metrics,” Otting said in a statement.

NYCB expects the transaction with JPMorgan to add 65 basis points to its CET1 capital ratio to 10.8% as of March 31. As the proceeds will be reinvested in cash and securities, its share of total assets will improve to 24% from 20% at March 31. Loan-to-deposit ratio is expected to decline to 104% from 110% at the end of the first quarter.

Source: finance.yahoo.com

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The average 30-year fixed mortgage interest rate is 7.13% today, down -0.05% over the last week. The average rate for a 15-year fixed mortgage is 6.57%, which is an increase of 0.03% compared to a week ago. For a look at mortgage rate movement, see the chart below.

Because inflation data hasn’t been improving, the Federal Reserve has been postponing rate cuts. Though mortgage rates could still go down later in the year, housing market predictions change regularly in response to economic data, geopolitical events and more.

Today’s average mortgage rates

Today’s average mortgage rates on May. 17, 2024, compared with one week ago. We use rate data collected by Bankrate as reported by lenders across the US.

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.

Which mortgage term and type should I pick?

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.

30-year fixed-rate mortgages

The 30-year fixed-mortgage rate average is 7.13% 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.

15-year fixed-rate mortgages

Today, the average rate for a 15-year, fixed mortgage is 6.57%. 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.

5/1 adjustable-rate mortgages

A 5/1 adjustable-rate mortgage has an average rate of 6.58% 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.

What’s behind today’s high mortgage rates?

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.

Will mortgage rates drop this year?

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.

Calculate your monthly mortgage payment

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.

How can I find the best mortgage rates?

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.

  1. Save for a bigger down payment: Though a 20% down payment isn’t required, a larger upfront payment means taking out a smaller mortgage, which will help you save in interest.
  2. Boost your credit score: You can qualify for a conventional mortgage with a 620 credit score, but a higher score of at least 740 will get you better rates.
  3. Pay off debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Not carrying other debt will put you in a better position to handle your monthly payments.
  4. Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs.
  5. Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.

Source: cnet.com

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At Inman Connect Las Vegas, July 30-Aug. 1, 2024, the noise and misinformation will be banished, all your big questions will be answered, and new business opportunities will be revealed. Join us.

Mortgage rates retreated from 2024 highs for the third week in a row and were headed below 7 percent after Wednesday’s release of two reports showing the economy cooled in April, potentially giving Federal Reserve policymakers an incentive to cut rates sooner rather than later.

A key inflation gauge, the Consumer Price Index (CPI), showed prices for a broad range of goods were up 3.4 percent in April from a year ago, down from 3.5 percent in March. It was the first downward move in annual price growth since January.

Core CPI, which excludes volatile food and energy prices and can be a better predictor of inflation trends, was up 3.6 percent in April from a year ago, an improvement from 3.8 percent annual growth in March.

A separate Census Bureau report released Wednesday showed retail and food services sales were slower than expected in April.

“The smallest increase in the core CPI since December will reassure the Fed that monetary policy is tight enough to bring inflation eventually back to the 2 percent target, though the run rate still needs to slow further to trigger rate cuts, unless payrolls tank first,” Pantheon Macroeconomics Chief Economist Ian Shepherdson said in a note to clients.

Futures markets tracked by the CME FedWatch tool on Wednesday put the odds of one or more Fed rate cuts by Sep. 18 at 73 percent, up from 65 percent on Tuesday.

Yields on 10-year Treasurys, a barometer for mortgage rates, dropped 10 basis points after the data releases and are now down nearly 40 basis points from a 2024 high of 4.74 percent registered April 25.

Mortgage rates retreat from 2024 highs

Data tracked by Optimal Blue lags by a day but shows that even before Wednesday’s news rates on 30-year fixed-rate mortgages had dropped to an average rate of 7.00 percent Tuesday — down 27 basis points from the 2024 high of 7.27 percent recorded on April 25.

A same-day index compiled by Mortgage News Daily (MND) showed rates on 30-year fixed-rate mortgages dropping 12 basis points Wednesday, to 6.99 percent.

If Optimal Blue’s survey shows a similar drop when data is released Thursday, that would mean homebuyers were able to lock contracted rates on 30-year fixed-rate loans at below 6.9 percent on Wednesday.

The rates reported by MND are higher than Optimal Blue’s because the MND index is adjusted to estimate the effective rate borrowers are offered, regardless of what points they’re willing to pay. Optimal Blue uses contracted rates provided for rate locks, even if borrowers have paid points to get a lower rate.

With inventories in many markets still scarce, homebuyers have yet to come out in force in response to lower rates.

After picking up by 2 percent during the week ending May 3, applications for purchase loans fell by a seasonally adjusted 2 percent last week compared to the week before, according to a weekly survey by the Mortgage Bankers Association.

Last week’s decline in rates “led to a small boost to refinance applications, including another strong week for VA refinances,” MBA Deputy Chief Economist Joel Kan said, in a statement.

The drop in purchase loan applications was driven largely by a 9 percent drop in FHA purchase applications, Kan said, compared to a 1 percent drop in applications for conventional loans eligible for purchase by Fannie Mae and Freddie Mac.

Joel Kan

“While the downward move in rates benefits prospective homebuyers, mortgage rates are still much higher than they were a year ago, while for-sale inventory remains tight,” Kan said.

Compared to a year ago, purchase loan applications were down 14 percent, while requests to refinance were up 7 percent.

Inventories are less of an issue for new-home buyers, and even as rates climbed in April, mortgage applications for new home purchases were up 22.1 percent from a year ago, a separate MBA survey showed.

Based on loan applications submitted to homebuilders’ mortgage subsidiaries, the MBA estimates that new homes were selling at a seasonally adjusted annual rate of 699,000 units in April, up nearly 14 percent from March.

“There continues to be healthy demand for new homes, given greater availability and other benefits over existing home purchases such as builder concessions and customization options,” Kan said. “First-time homebuyers account for a growing share of purchase applications with the FHA share of applications at 26.3 percent in April.”

Inflation moderated in April

Last year inflation, particularly core CPI, was consistently trending down, raising hopes that the Fed might cut interest rates in time for the spring homebuying season.

But a string of hot inflation reports in March and April sent mortgage rates rebounding to new 2024 highs — sparking speculation that the Fed might not only keep rates higher for longer but, eventually, be forced to raise rates to bring inflation under control.

However, Fed policymakers have always said that it would take time for the 11 rate increases implemented from March 2022 through July 2023 to have an effect on the economy. Those rate hikes brought the short-term federal funds rate to a target of between 5.25 percent and 5.5 percent — the highest level since 2001.

At their May 1 meeting, Fed officials took a subtle step toward easing by dialing back the pace of “quantitative tightening” — an unwinding of the central bank’s $7 trillion balance sheet — to $40 billion a month, less than half the pace envisioned two years ago.

Two days later, with mortgage rates already retreating from 2024 highs, a surprisingly soft April jobs report from the Labor Department accelerated the pullback in rates, as bond market investors who fund most mortgages reassessed the likelihood of Fed rate cuts.

The latest CPI report is additional evidence that the economy is cooling, and inflation is trending down.

Ian Shepherdson

“Looking ahead, the case for expecting a further slowdown in core CPI inflation remains compelling,” Shepherdson said. “Supply chains have normalized, wage growth is weakening, and corporate margins are flat but still hugely elevated, indicating clear scope to fall ahead. At the same time, global food and energy prices remain unthreatening, and rent inflation for new tenants remains subdued.”

Shepherdson thinks the foundations are in place for further deceleration in core CPI this summer, allowing the Fed to start easing in September — or as early as July, if job growth continues to decelerate as quickly as implied by National Federation of Independent Business (NFIB) surveys.

But Nigel Green, CEO of Dubai-based deVere Group, issued a more hawkish view, warning that investors are “indulging in wishful thinking on Fed rate cuts” this year.

Nigel Green

“Super cautious Fed officials will need to see several consecutive months of evidence showing inflation — which is proving far stickier than had been hoped — is really heading back to the 2 percent target before they consider a pivot on monetary policy,” Green said in a statement. “As such, we still expect there’s a considerable risk that they will not feel comfortable about cutting rates before 2025.”

The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, is closer to reaching the Fed’s 2 percent inflation target than CPI, registering 2.7 percent in March.

While the March PCE print was up from 2.5 percent in February, the next PCE data release on May 31 could provide more downward momentum for mortgage rates — or send them rebounding again.

Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

Email Matt Carter

Source: inman.com

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If you’re in the market for an affordable house to own, you might be debating whether it’s cheaper to build your own home or buy an existing home.

For those who have attempted a large-scale renovation on an older home, it may feel as if it would have been more cost-effective to start from scratch with new construction. But many costs go into building your own house that you must factor into the decision of whether to build or buy.

Let’s look at some aspects of building vs. buying an existing home. The outlook may vary depending on where you live and the type of house you want. You’ll also need to consider how you plan to pay for the home, and even if you are willing to consider off-grid living to reduce costs.

Key Takeaways

  • Building a house can be more expensive and time-consuming than buying an existing home due to costs like land purchases, construction, and potential delays, though it offers customization and energy efficiency benefits.
  • Buying an existing home is generally cheaper and quicker, providing location flexibility and mature landscaping, but may involve compromises in design, competitive markets, and potential maintenance issues.
  • Financing options for building include construction loans, personal loans, and land loans, while mortgages are typically used for purchasing existing homes.

Home and Land Values in Your Area

What’s the price of land in the area where you want to live? How much would it cost to purchase a fully constructed house (called “existing construction”) with the features you need and the size you want? Are empty lots available to build where you would like to live?

If you live in or are moving to a major metropolitan area or a suburb of a large U.S. city, it may be harder to find land and, if you do, the land will cost more.

On the other hand, if you move to a less populated area, you may be able to find several acres or more for under $20,000 or less.

When It’s Cheaper to Buy an Existing Home

Finding affordable land represents the first step toward being able to build a home for less than it would cost to buy. But if land goes for a premium in the area you wish to buy, it may be cheaper to buy an existing home.

Larger homes, obviously, cost more to build than smaller homes. If your main goal is to secure a house of your own for the lowest possible price, you can save money building a home in a less congested area where land is cheap.

It’s unlikely you’ll find a house for sale anywhere that doesn’t need a lot of work for less than $100,000. However, you may be able to pick up a plot of land and build a starter home like an A-Frame or a prefab, or even a tiny house under 400 square feet.

Types of Houses You Can Build

The cost of your house construction project depends on the house you choose. Here are some affordable examples.

Tiny houses – Tiny houses are typically under 400 square feet. They simply cost less to build than any other style of conventional home. They require less land, fewer materials, and take less time to construct.

Tiny houses may start at $10,000 and go up to $120,000 or more, which is the price of some regular homes. The average price for a tiny house is around $30,000 to $40,000.

Consider jumping on the tiny home trend to build your starter or retirement home.

A-Frame houses – A-frame houses represent a basic style of construction with slanted roofs. They have a loft bedroom rather than a full-fledged second story.

Prefab Homes – You can buy the parts for a pre-fab home and have it put together, or assemble it yourself, on your property. Some pre-fab homes, called modular homes, come as individual rooms and pieces that connect. Each module includes plumbing, electrical, and everything else you need to build a house already installed.

Some pre-fab home kits come as individual panels, and you’ll need to add the rest of the components. You can purchase pre-fab homes for as little as $50,000 or less on eBay.

Paying for Your Home: Construction Loan, Personal Loan, Land Loan, or a Mortgage

Unless you have cash reserves lying around, you’ll likely need financing to purchase your land or home.

If you do have the cash saved, once you do the math, you’ll probably realize it’s smarter to take out a mortgage or loan at a low interest rate. Then, you can invest your money at a higher rate of return.

That leaves you with several options to pay for your house or its construction.

Construction Loan

A construction loan acts as a line-of-credit rather than a conventional loan. The loan term usually lasts one year. In that time, you borrow the money you need as you need it. When you make your loan payments, you only pay interest on the money you borrowed.

Even though you only pay interest on the money you use, construction loans typically have higher interest rates than home mortgages. That’s because the land purchase is the only collateral available until the house is complete.

A construction loan can fund the land, building materials, and even provide funds to pay contractors to build your home. Your lender will want to see your construction documents and budget for the project. They’ll want to approve each step of the building process to ensure construction stays on track.

Once the home construction is complete, you can take out a conventional mortgage, which you can use to pay off the high-interest loan.

Personal Loan

If you’d rather not deal with the hassles of a construction loan, showing documentation to your lender, and taking out a mortgage after a year, consider a personal loan. The better your credit score, the lower your interest rate on an unsecured personal loan will be.

Personal loan terms tend to range from two to 10 years.

If you have cash reserves or assets that would cover the cost of the loan, you may want to take out a secured personal loan, using your cash or investments as collateral. You may be able to get approved for a secured personal loan at a much lower interest rate.

Land Loan

If you want to purchase land that doesn’t have power lines or public water running to the property, you may consider a land loan. Most lenders expect you to put at least 50% down on this type of purchase because it’s considered a high-risk investment.

Once you use the land loan to purchase the land, you may be able to finance construction through a personal loan. Or you can wait until you pay off the land loan, have utilities installed, and then get a construction loan.

Mortgage Loan

The best way to finance the purchase of an existing house is usually through a mortgage loan. These loans tend to have very low interest rates, especially compared to the loan options listed above. You may even be able to secure an FHA loan with as little as 3.5% down if you’re a first-time homebuyer.

Connect Utilities or Live Off the Grid?

There are a few more choices to make when it comes to building your own house or buying an existing home: What kind of utilities will you need?

Existing Construction

Existing construction, of course, comes already connected to sewer systems (or may include a cesspool septic system) and electricity. It already has home heating and cooling systems. And it’s probably fairly easy to run a cable television and broadband internet connection from the street to your house. At the very least, you can connect to satellite TV and internet services.

At most, it will cost a small connection fee to turn on the electricity and internet service to your home. Sewer service typically costs less than $100 per year.

New Construction

On the other hand, new construction has none of these things. You’ll need an electrician to run all the wiring. Then, you’ll need to connect to “the grid,” which means you’ll be getting electricity from your utility provider.

Even if you decide to install solar panels, which cost an average of $13,142 (after tax credits), you’ll need to pay to have them connected to your electric company. Your electric company monitors usage and charges you if your solar panels don’t produce all the energy your household uses.

Septic systems can cost from $3,000 up to $10,000, according to HomeAdvisor. Heating and cooling systems vary widely, too, depending on the type of system you prefer.

Building Your Home Off-the-Grid

If you think you can save money by living off the grid, you might be surprised. You’ll still need to invest in some sort of energy source, whether solar panels or wind turbines.

You can build a well for water and use composting toilets to avoid being connected to city water. But, unless you want to dramatically change your lifestyle, off-grid living may not be the best way to save money on your new house.

Some areas don’t permit off-grid living, so it may be harder to finance your new house if you can’t show plans for utility hook-ups.

Buy or Build a House: Pros & Cons

With so much to consider when deciding whether to buy or build a house, it can help to get a clear idea of the major pros and cons of each. We’ve listed some of the details below to help you make your decision.

Pros of Buying an Existing Home

  • Less costly: Buying a house is usually significantly less expensive than building one, especially as land loans can come with higher interest rates and down payments. And while home buying is an increasingly expensive endeavor these days, labor costs and construction materials are also increasing just as rapidly.
  • Quick move in: Most buyers of existing homes will be able to move within a few weeks, compared to the potential wait of over a year for new construction homes.
  • Location flexibility: Buying an existing home makes it much easier for you to live where you want. If you want to build a house and still live in or near the city, you’ll likely have to fork out a small fortune for the land rights. Home buying makes it much easier, and cheaper, to settle in the suburbs.
  • Established landscaping: Buying an existing property usually means you’ve got access to a mature landscaping, fully grown trees and a well established garden. For most homeowners, a beautiful garden is a must, but this can take many years to achieve with a new build.

Cons of Buying an Existing Home:

  • Competitive market: As we’re still very much locked in a seller’s market, the stress of trying to find and land the perfect home can make it a challenge. Home buying in today’s real estate market requires graft, patience and determination, not to mention a robust budget.
  • Aesthetic compromise: The intensity of the real estate market today means you’ll likely have to make some compromise when buying a house, as some elements of the design or style may not be to your tastes.
  • Maintenance & repairs: In a competitive market, you may also have to settle for a home that needs some repair. Depending on your initial budget, you might have to factor in funds for upgrades, and in general, you’re more likely to need to splash out on maintenance sooner than if you build a house.
  • Less sustainable & efficient: As a rule of thumb, buying a house is likely to mean that you’ll have a less sustainable home than if you had built one. Depending on how old an existing home is, you might have to budget for energy efficiency upgrades.

Pros of Building a House:

  • Customization: Building a house comes with the obvious benefit of customization, at least to some degree. The chance to build your dream home, and have full direction of the construction process, is a huge motivator for many.
  • Less competition: Another significant benefit of building your own home is avoiding the intense competition of the housing market. Once you own the land, the only major competition you need to consider is for construction supplies and labor.
  • Lower maintenance costs: A brand new home should be in the best condition possible, compared with any existing homes. You won’t have to worry about replacing major appliances or any significant home repairs in the near future.
  • Healthier & more sustainable home: A new build will be more energy efficient, meaning lower energy costs and a more sustainable home. There is also the benefit of not needing to worry about things like lead paint or possible asbestos in your home.

Cons of Building a House:

  • Expensive: Building a house is almost always more costly than buying an existing home. This is partly because you may need to obtain a land loan, as well as a loan to cover construction costs, and then a mortgage once the house is complete.
  • Hidden costs & delays: Most construction projects require us to expect the unexpected, and building a house is no different. Delays and unexpected costs are par for the course, and in today’s climate with supply chain issues and increased construction costs, the final cost of your new construction home can quickly soar.
  • Stress & time: It would be naive to underestimate the potential toll of both stress and time when building a house. With so much more work to do in terms of financing, budgeting, designing and decorating, the home building process will most likely be very stressful at least for a while, especially if you’re hoping to be finished on time.
  • More Work: Building a house means more involved effort on your part, as you’ll have to work with various professionals, approve every step of the process, review contracts and manage fluctuations in your budget along the way.

Bottom Line

Ultimately, you can save money building a home, especially if you choose a simple home style and are willing to do most of the work yourself. Plus, you’ll get the satisfaction of knowing the creative role you played in your home—and that everything in the house is brand new.

But if you’re not considering a small house in a rural area where land is cheap, you may find it’s more cost-effective to buy an existing house. Then, you can spend time and money over the years to turn it into your dream home.

Source: crediful.com

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It’s bad enough that mortgage interest rates and home prices are high at this time, but even worse, industry experts don’t predict a drop in either for some time to come.

Read Next: Why a Billionaire Bought a Bunch of Homes in Duluth, Minnesota

Find Out: 4 Genius Things All Wealthy People Do With Their Money

Wannabe homebuyers may be asking themselves how they can afford a home under these conditions. With no major relief in sight — barring congressional interventions — what can a potential homebuyer do to afford a new home?

Experts explain 14 tips that can make your dream of homeownership a reality even in these tough times.

Understand Your Financing Options

“With interest rates expected to remain elevated for the foreseeable future, the best thing you can do right now is understand your financing options,” said Chris Birk, the vice president of mortgage insight at Veterans United Home Loans.

In addition to having a clear understanding of what you can afford based on your own financial situation, he said it’s also important to look for opportunities that make purchasing more affordable.

Comparison Shop

With rates topping 7%, even a small difference in interest rates can add up over multiple years, Birk said, so shop around.

“Shop with multiple lenders, and compare rates,” recommended Birk. “A buyer can save hundreds of dollars a year based on a 0.25% difference in interest rates.”

Birk continued with this example: At 6.75% on a $300,000 mortgage, a buyer can expect to pay $1,946 a month in principal and interest. The same buyer would have a monthly mortgage payment of $1,996 and $2,047 with a mortgage rate of 7% and 7.25%, respectively.

Learn More: Here’s When To Buy a New House, According to Kevin O’Leary

Understand Your Mortgage Options

Birk also suggested getting a comprehensive understanding of the types of mortgages available to you before you make any move.

“Government-backed loan programs come with low or no down payments, and can be a good option,” he said.

“For instance, VA loan rates are typically about 0.25% lower than those of conventional loans, and credit guidelines are more flexible. In addition, the VA benefit never expires, so you can use it every time you purchase a home.”

If you already own a home and are trying to buy another, or sell and buy, Birk said you may be able to refinance your current mortgage or tap into the equity in your current home to buy a new one.

Consider an Assumable Mortgage

A lesser known option is an assumable mortgage, which allows a buyer to purchase a home by taking over the seller’s current mortgage loan, Birk explained.

“VA, USDA and FHA loans are all assumable. Although the downside is often a larger down payment, buyers who assume a mortgage typically have lower closing costs, no appraisal and less debt because the amount of their mortgage is lower,” he added.

Buy Down Your Rate

A rate buy-down allows buyers to reduce their mortgage rate over the life of the loan, which decreases their monthly mortgage payment.

Birk explained, “Buyers can either temporarily or permanently lower their interest rate by purchasing discount points upfront or rolling them into the loan. The buy-down is typically funded by the buyer, seller or builder.

“In fact, some sellers or builders use it as an incentive to make the property more affordable and attractive for buyers.”

Explore Alternative Neighborhoods

According to Alex Coffman, a real estate agent and co-owner of Teifke Real Estate, another option is to expand the areas where you’re looking.

“Consider investigating neighborhoods surrounding your primary area of interest,” Coffman said.

“In many cases, these regions have much lower prices but still offer similar benefits. Specifically, new neighborhoods can present a great opportunity in terms of value as well as appreciation.”

Compromise Your Home Choice

If you’re overly fixated on what your dream house should look like, Coffman warned you might be limiting your options.

“Focus on needs rather than wants,” Coffman recommended. “Be open to properties with some small issues. Occasionally, making minor changes can transform an almost-suitable house into one that is perfect for you.”

Meet With a Financing Mortgage Broker

Don’t try to figure this out alone, Coffman urged. It’s a smart idea to reach out to your mortgage broker and go through all the options available to you.

“Apart from the traditional thirty-year fixed-rate mortgages, there may be adjustable rates or other loan products that are a better fit for your financial circumstances,” he said.

Explore Vendor Financing and Lease-to-Own Programs

Additionally, Coffman explained there may be vendor financing and lease-to-own agreements that offer alternatives when traditional mortgage financing is not possible or desired at this point in time.

He added, “This way, someone may become a homeowner without necessarily getting a conventional mortgage instantly.”

Take on Shared Ownership

If you’re open to purchasing property together with someone you trust, such as a friend, partner or family member, homeownership can be much more affordable.

Coffman said, “Joint ownership makes qualifying for a mortgage quite easy while enabling one to afford his/her preferred household goods or services.”

However, in this case, he warned to take precautions and put together clear agreements and legal documentation that includes state provisions plus obligations.

Seek Government Programs and Local Housing Initiatives

Especially if you’re a first-time home buyer, Coffman recommended looking into government programs and local housing initiatives aimed at helping first-time buyers or people within specific income brackets achieve their homeownership dreams.

“These programs might provide down payment assistance programs, subsidized rates or tax breaks to make homebuying affordable,” he said.

Increase Your Down Payment

On the financial end of things, Coffman shared how saving up to make a larger down payment can often help reduce your monthly mortgage payments and also qualify you for better rates.

Improve Your Credit Score

Improving your credit score can also significantly affect the interest rate lenders offer, leading to more favorable loan terms, according to Coffman.

Consult With Professionals

Lastly, Coffman urged homebuyers to talk to real estate agents, mortgage brokers and financial advisors with insight on what’s happening around the area so they can advise you accordingly. They have the insider expertise and knowledge to help you get to your goal.

While you may have to make some alterations, sacrifices and budget shifts to be able to afford a home right now, it may be more possible than you think.

More From GOBankingRates

This article originally appeared on GOBankingRates.com: Mortgage Rates and House Prices Aren’t Dropping — 14 Tips To Afford a Home Anyway

Source: finance.yahoo.com