3 Reasons Why the Fed Raising Interest Rates Is Good for Home Buyers

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Buying a home, fed raising interest rates, homes for sale in Jacksonville FL, interest rates, interest rates rising, Jacksonville FL Real Estate, Jacksonville Real Estate, real estate, real estate advice, real estate information, Real Estate Team, real estate tips, The best real estate agent in Jacksonville

If you’re either in the process of buying a house, or thinking of jumping into the market, you’re probably well aware that rates have jumped significantly in recent weeks. And that likely doesn’t feel or sound like anything good to you. 

But what you might not be well aware of is that, according to Chair of the Federal Reserve, Jerome Powell, raising interest rates is actually being done (at least in part) for the good of home buyers. 

With rates nearly double what they were not too long ago, you may be wondering where on earth the silver lining is. This Fortune article keys in on three things Powell is hoping the Fed’s actions will do for real estate buyers. Here’s a quick summary and how it can help you in your home search:

• They hope it gives you a “bit of a reset” – In short, there hasn’t been enough listings, and there are too many active buyers for the amount of available inventory. Ultimately, that is what led to bidding wars and prices continuing to rise. They’re hoping that by raising the rates, it will help raise inventory levels and price some buyers out of the market, giving buyers who continue with their search for a home more time and options to choose from.
• Potentially lower prices – Powell didn’t come right out and say that he hoped prices would fall, or that they definitely would. In fact, he basically said he’s not sure if it’ll affect them at all, but that they’re keeping an eye on how it affects prices. The issue is still that there are not enough houses for sale. In order for prices to come down, there needs to be an uptick in inventory. If you read between the lines, it sounds more like they’re hoping that “overvalued” markets will correct, but other areas will plateau or only see mild increases for some time, as opposed to the steep increases in value we’ve been seeing. So, this isn’t a promise, and it will likely depend a lot on your local market conditions. Keep in mind that they’ll also be sensitive to protecting the values and equity of homeowners to avoid causing homeowners financial issues or the inability to maintain or sell their house. It’s a balancing act, which is likely why he sounds a bit vague and says they’ll be watching it carefully.
• They want mortgage rates to fall – Powell just wants to get inflation under control, and calm down the real estate market so that prices don’t get too out of whack with incomes. Once that’s done, he wants to see rates drop again. Now that won’t be in the next few weeks or months. In fact, it could take a couple of years before you see that happen.

The Takeaway:

While this certainly isn’t great news for every buyer in the market, it can be for you. The rate hikes will edge some buyers out of the market, but those who are qualified and in a position to buy at the higher rates will ideally benefit from lower competition and more homes to choose from at a less frenzied pace. 

Prices may not take a steep dive, which some buyers may be hoping for, but that can be a good thing if you already own a home anyway, and want to use the equity you’ve gained by using it to buy a bigger home, or downsize and pocket some of your gains. 

On the other hand, if you are hoping for prices to fall, they will at least likely stop rising so much and so fast, and may even take a dip if your market is overvalued. So there is hope for that. Just be ready and in a position to pounce if they do, because inventory is still low, and competition is always fierce for well-priced houses, regardless of what rates are doing.

And lastly, even if you buy at a higher mortgage rate right now, know that the Fed wants to lower rates in the near future, so you can always refinance when they do.

So, even though it may not seem like the Fed raising rates is a good thing for you, it can be if you understand what they’re trying to do and are in a position to take advantage of the lower competition and increased inventory they’re hoping to create by doing so. Let’s discuss your next step – Kevin and Jennifer Hanley, REALTORS The Hanley Home Team of Keller Williams Realty Atlantic Partners Southside HanleyHomeTeam.com 904-515-2479

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7 Ways for Homebuyers to Deal With Rising Interest Rates

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Buying a home, homes for sale in Jacksonville FL, interest rates, interest rates rising, Jacksonville FL Real Estate, Jacksonville Real Estate, Mortgage changes, mortgage rates, real estate, real estate advice, real estate information, Real Estate Team, real estate tips, rising interest rates, The best real estate agent in Jacksonville

If you’ve been considering buying a house — or if you’re actually in the process — you’ve probably heard two things quite a bit lately:

1. Interest rates are on the rise.
2. They’re still historically low.

Yes, they are still historically low, but that doesn’t change the fact that they’re higher than if you’d just bought a house a little while ago. Kind of painful to hear, huh? 

What you’d probably rather hear is that rates and house prices will come down in the near future, so just hold on a little while and waiting will have paid off. Unfortunately, it’s looking like rates could go up even more in the near future, and house prices aren’t looking like they’ll definitely take a dramatic tumble. 

So let’s look at some ways you can deal with rising interest rates to make your payments as manageable as possible, and maybe even save some money.

• Clean up your credit. The better your credit is, the better your rate will be. Take a look at your credit report and see if there’s anything glaringly wrong that you can have corrected. If it all looks foreign to you, ask your mortgage rep or a credit repair specialist to take a look and give you advice on anything they see that you could get corrected, pay off, or pay down in order to raise your credit score.
• Shop around. Check with several lenders and see who offers you the best rate. Or go through a mortgage broker who has access to many lenders and can do the shopping for you. Be careful if one sounds way too good to be true; they could be quoting you a much better rate, but beware of the fees. If you have access to a credit union or a smaller local bank that knows you, make sure to check with them—they often have better rates because they lend their own money and / or have a closer relationship with their customers.
• Buy discount points. Consider buying down your mortgage rate by paying “discount points.” These are fees you pay up front in order to get a lower mortgage rate. Buying a point will cost you 1% of your home loan and will generally buy your rate down by a quarter percent, although that can vary from lender to lender. Most will have a cap on how many points you can buy, and they also may offer you the option of buying lower increments than a full point. This is a good option if you plan on staying in the house for some time. Make sure to weigh how much it’ll cost you, and how long it’ll take to break even and then reap the benefits in terms of savings. 
• Lock in your rate. Even though rates have already been on the rise, there’s a good chance they’ll go up even more. Rate locks are typically only offered for up to 60 days, so if you’re serious about buying soon, consider locking in at the current rate. Make sure to ask your lender how much a rate lock will cost you, if anything. Also find out if they offer a “float down” option, which will allow you to get a lower rate than you locked in at, if the rates do happen to come down before you close on your house.
• Get an adjustable rate mortgage. Rates have been so low for so long that there wasn’t much demand for adjustable rate mortgages, since the 30-year fixed-rate mortgage was so affordable. But now that people are trying to save money however they can on their rate, adjustable rate loans are making a comeback. These typically afford you a better interest rate at a fixed rate, but only for a certain number of years before they adjust (as the name suggests). They could adjust up or down, depending upon what rates are when the time comes. To be safe, plan on the worst-case scenario of the rate being higher when that day comes. The length of time you have before the rate adjusts is often 5, 7, 10, or 15 years. These are perfect if you’re not even thinking about staying in the house for a full 30 years. So, consider how long you plan on staying in your house, and opt for one that won’t adjust before you move so you won’t be affected by a rate adjustment at all. For instance, if you’re pretty sure you’ll move in the next decade, a 10-year ARM might be the way to go.
• Pay biweekly. By paying half of your monthly mortgage payment once every two weeks, you end up making an extra payment per year. Doing this cuts years and lots of interest off of your loan. 
• Refinance when rates go down. Keep an eye on mortgage rates. When they come down a good amount, refinance your mortgage at a lower rate.

So, even if rates aren’t as low as they were in the recent past, you still have some options and control over how much interest you have to pay. Use one, or a mix of the strategies above, and you’re bound to save money! Let’s strategize together…Kevin and Jennifer Hanley, REALTORS The Hanley Home Team of Keller Williams Realty Atlantic Partners Southside 904-515-2479 HanleyHomeTeam.com

Affording a Home

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affording a home, buying your first home, first-time homebuyer, home affordability, homes for sale, Homes in Jacksonville FL, interest rates, interest rates rising, renters, tenants

Home shopping can be tough when you’re not sure how much you can afford. If you’ve wanted to live the dream of owning your own home, but haven’t been sure where to start, we’ve put together a few tips that can make it easier to get a handle on where to start.

1. Tax benefits usually mean you can afford more than your rent. Interest deductions on taxes typically translate into significant savings. Many people find they can afford about 33% more than their current rent. To get an idea of what this might be for you, multiply your current rent by 1.33.

2. A home price two-to-three times your gross income is usually a reasonable place to begin. For example, if your household made $75,000 last year, you could begin looking in the $150,000 – $225,000 range to start.

3. Know how much you can put down. Ideally, you’d want to have 20% of the home’s price set aside for a down payment. On a $200,000 home, this would be roughly $40,000. While people qualify with less, it can result in higher interest rates (which translate to higher monthly payments).

4. Determine your “debt factor.” Lenders will often cite the 28/41 rule when it comes to your debt. This means that your mortgage (plus taxes and insurance) shouldn’t exceed 28% of your gross monthly income. Your total payments (credit card, car loan, etc.) plus your mortgage shouldn’t come to more than 41% of your gross monthly income.

We often work with first-time buyers and renters to get themselves lined up for home ownership. If you’d like to learn more, or have questions, we’re happy to help.  Kevin and Jennifer Hanley, REALTORS, The Hanley Home Team – http://www.HanleyHomeTeam.com 904-515-2479

Down Payment Savings Tips

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Buying a home, downpayment, Downpayment Assistance, Downpayment to buy a home, homes for sale in Jacksonville FL, interest rates rising, Jacksonville FL Real Estate, low interest rates, real estate, Renting vs Buying

Every month you pay the rent, you’re probably thinking, “I wish this money was going into my future.” For a lot of would-be first-time home buyers, it’s the down payment which makes home ownership seem impossible. Climbing the “down payment mountain” isn’t impossible. Like any major challenge, it’s all a matter of breaking your big, hairy, audacious goal down into practical steps.

Here are some tips to conquer saving for a down payment:

Find out where your money goes. You can’t start saving if you don’t know where you’re spending. For a month or two, track each expenditure, no matter how small. Get an objective picture of where you’re spending the cash.

Get specific about how much you need to save. Even if you’re not 100% sure what your down payment needs to be yet, it’s good to start doing a little math to figure out how much you need to save. Pick a dollar amount and a timeline to hit that dollar amount. For example, a $25,000 down payment in two years comes to $1,041/month. Sound unrealistic? Either scale down your home desires to something smaller or scale up your timeline. If you can wait three years, that monthly savings goal drops to $694/month.

Determine the big moves you can make. If you’re in a three bedroom apartment and can stomach the idea of scaling down to a one bedroom, how much would you save in rent? What about going from two cars down to one? If you can make it work, these sacrifices will have a huge impact on your savings goals.

Setup a separate savings account. Don’t let your dream home money mingle with your regular checking or savings account. Establish a high-yield savings account with a credit union or money market account to protect and build your stash. It’s important to have a separate account with a “hands off” attitude.

Mind the risky investment schemes. Once you have a little momentum, you might be tempted to take some of that cash and invest it in order to make it grow faster. Be very prudent about this, as investing in stocks, startups, or high-yield funds can easily decimate your savings. Be conservative.

Of course, it’s important to know how much home you want to buy when you’re saving up for your down payment. We’re happy to give you an idea what homes are selling for in your area. Feel free to get in touch any time if you have questions: Kevin and Jennifer Hanley, REALTORS Keller Williams Realty Atlantic Partners Southside http://www.HanleyHomeTeam.com 904-422-7626

Homebuyers need to act now

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buy now, homes for sale in Jacksonville FL, interest rates, interest rates rising, Jacksonville, mortgage rates, the time to buy is now

CHICAGO – Feb. 4, 2015 – Homebuyers need to move fast if they want to spend less, according to Jonathan Smoke, chief economist at realtor.com.

“Delayed purchases will only result in higher monthly mortgage payments as prices and rates rise,” Smoke writes. Realtor.com forecasts that affordability may decline as much as 10 percent over the year.

The Federal Reserve continues to remind the financial markets that it plans to raise its target federal funds rate this year, which will cause mortgage rates to rise. Many economists predict that 30-year fixed-rate mortgages will average near 5 percent by the end of the year.

For now, mortgage rates are near historical lows for homebuyers and homeowners. Freddie Mac reported last week that the 30-year fixed-rate mortgage averaged 3.66 percent (last year at this time it averaged 4.32 percent), and 15-year fixed-rate mortgages averaged 2.98 percent (a year ago, it averaged 3.40 percent).

“Right now, the Fed is using the word ‘patient’ to describe its approach to picking the time to raise the target rate,” Smoke notes. “However, when the Fed ‘loses patience,’ rates will go up at least 20 to 40 basis points in anticipation of the target rate officially going up. … So, buyers beware: The clock on these low mortgage rates may be ticking.”

Source: “2015: Buy Now, Before the Fed’s Patience Ends,” realtor.com® (Jan. 30, 2015)

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