Tag Archives: mortgage

Interest Rates and the Rising Home Prices

Should You Wait for Lower Prices and Interest Rates?

Home prices have been rising for over seven years, and mortgage interest rates for five years. Should you wait to buy a home? The numbers say no.

According to the National Association of REALTORS®, the median existing home price is more than $250,000, the highest it’s ever been. If you wait to buy a home, you’re losing the opportunity to build equity, or ownership, in a home of your own.

If you’re worried that homes are priced too high and you’re afraid of losing money, consider this: According to the U.S. Bureau of Labor Statistics, prices for housing were 50.88% higher in 2018 versus 2000, for an average increase of 2.31 percent a year. The average inflation rate for the same period was 2.07 percent. Home ownership beat inflation by 0.24 percent.

Mortgage interest rates hit all time highs in October 1981, when a benchmark 30-year fixed rate was 18.45 percent (with 2.3 points paid by the borrower), according to Freddie Mac. The lowest took place November 2012 at 3.35 percent with 0.7 points. At about 4.5 percent for a conforming fixed-rate for those with good credit, mortgage interest rates are tantalizingly low.

The best time to buy a home is when you want to, not when you think the market timing is best. Unless you have a crystal ball, you don’t know if prices and interest rates will recede, plateau and or rise. Look at homebuying for the long term, and you’ll be glad you didn’t wait.

As always consult your financial professional for interest rate information and advice.

Mortgage Advice: How Late Payments Impact Credit Scores

How Late Payments Impact Credit Scores

FICO scores, the Fair Isaac Corporation credit-scoring system, are used by lenders to determine your creditworthiness. The lower your scores, the more risk you pose to lenders, resulting in higher interest rates or loan denial.

Scores fluctuate for many reasons, including your debt-to-income ratio, making minimum payments only, credit inquiries and other factors. But nothing impacts credit scores like a missed rent or revolving credit payment. And, for the best-scoring consumers, the drop in credit scores is the most punishing.

Making timely payments is one of the easiest things you can do to show you’re using credit How Late Payments Impact Credit Scoresresponsibly, which is why your payment history accounts for the largest part of your FICO score—35 percent.

Late payments remain on your credit report seven years from the original delinquency date, regardless if the payment is made and the account is current or if the account is closed and the payment is never received, according to Experian.com.

The more recent the late payment, the more it can impact your scores. If you’re late or missed a payment, make the account current as quickly as possible. The length of time it takes to recover will depend on whether the late payment is an anomaly or part of a habitual pattern.

Establish a current history of on-time payments. Use at least one credit card, paying in full each month to avoid finance charges.

On-time payments will add positive activity to offset negatives from the past, and over time your credit scores will rebound.

Are You Concerned About Rising Interest Rates?

Don’t Worry About Rising Interest Rates

National average 30-year fixed rate mortgage interest rates have been close to or well under four percent for nearly a decade. They should stay that low forever, right?

Don’t bet on it. Low unemployment, rising salaries, fears of inflation and an increasing federal deficit are among many reasons why interest rates are expected to rise in 2018. What happens is that the Federal Reserve raises overnight borrowing rates to banks, causing banks to pass those higher costs onto borrowers. Car loans, credit cards and mortgage loans become more expensive.

But don’t let rising rates discourage you from buying a home. While you’re going to pay more Rising Interest Ratesfor your loan in interest, with a correspondingly higher monthly payment, you’re getting higher standard tax deductions in 2018 ($13,000 to $24,000 for couples filing jointly, $6,500 to $12,000 for single filers.) Child care credits are more generous, and your mortgage interest payments are still tax deductible, up to loans of $750,000 or more.

According to the mortgage calculator at Bankrate.com, a home purchased by a borrower with excellent credit for $400,000, with 20 percent down ($80,000) and a benchmark 30-year fixed-rate mortgage at 4%, would have a monthly payment of $1527.73. If rates hit 4.5%, the same borrower would pay $1621.39 monthly, or a difference of about $94. Roughly, every increase of an eighth of a point translates to a little less than $25 per month more in your payment. As always, consult your tax professional for specific advice.

Compared that to the tax breaks you’re getting, you’re ready to go.