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

New Federally Backed Loan Limits May Help Homebuyers In 2021

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Home prices have been steadily increasing in 2020—and as home prices increased, many buyers found they needed larger mortgages in order to purchase homes. But because there’s a limit on conforming loans, many buyers either had to explore alternative loan options (which often carry a higher interest rate) or look for homes in a lower price range (which, with inventory low in markets across the country, proved extremely difficult).

Luckily, access to larger conforming loans is on the horizon.

On November 24, the Federal Housing Finance Agency announced they would officially be increasing the conforming loan limits for Fannie Mae and Freddie Mac-backed mortgages in 2021. Currently, the limit for conforming loans for single-family units for most areas of the United States is $510,400. That limit will increase to $548,250 in 2021—an increase of 7.4 percent.

In higher cost markets (like areas of California and New York), the limit for conforming loans will be higher at $822,375—which is 150 percent of the baseline conforming loan limit of $548,250.

The Takeaway:

What does that mean for you? Increasing the limit for conforming loans will allow buyers to increase their purchasing power and keep up with rising prices—so if you’ve been thinking about buying a home, 2021 is looking like a great time to make a move. Let’s get started! Kevin and Jennifer Hanley, REALTORS The Hanley Home Team of Keller Williams Realty Atlantic Partners Southside 904-515-2479 HanleyHomeTeam.com

Fed vows to keep rates near zero until inflation tops 2%, likely keeping meager rates 4 to 5 years

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Paul Davison USA Today Published 2:00 pm ET Sep 16, 2020 Updated 5:17pm ET Sep 16, 2020

The Federal Reserve said Wednesday that it will likely keep its key interest rate near zero until the economy reaches full employment and inflation runs “moderately” above its 2% goal for “some time,” a vow that economists say is likely to keep rates at rock bottom for the next four to five years.

The central bank made the market-friendly commitment sooner than many top economists anticipated and it drove the Dow more than 150 points higher before the market gave back the gains on persistent tech stock jitters. .

The Fed’s assertion is consistent with its new policy framework unveiled last month, which states that officials will no longer preemptively raise rates as unemployment falls to head off a potential spike in inflation. Rather, the Fed will allow inflation to edge above 2% for a time to make up for years of persistently low inflation and to bolster job gains.

The Fed plans to keep its benchmark short-term rate near zero until “labor market conditions have reached levels consistent with the committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time,” the Fed said in a statement after a two-day meeting.”

That, the central bank said, will help ensure inflation averages 2% “over time” and the public cam reliably expect 2% price increases. 

“These are powerful commitments that we think will support the full recovery as long s it takes,” Chairman Jerome Powell said at a news conference.

Previously, the Fed said it would maintain near-zero rates “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

The U.S. economy has partially recovered from the coronavirus recession more rapidly than expected, but the Federal Reserve envisions a slog the rest of the way.Get the Coronavirus Watch newsletter in your inbox.

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“The labor market is recovering but it’s a long way — a long way — from maximum employment,” Powell said.

Besides keeping its benchmark rate near zero, new Fed forecasts indicate it likely will stay there at least through 2023, based on policymakers’ median estimate. That’s a year longer than its previous estimate since the Fed’s forecast horizon was extended. But the promise to keep rates near zero until inflation picks up should maintain rock-bottom rates until mid-2024 or possibly longer, says economist Kathy Bostjancic of Oxford Economics. 

The Fed now predicts the economy will contract by 3.7% this year, below its 6.5% estimate in June, and the 8.4% unemployment rate will fall to 7.6% by year-end. The Fed previously reckoned the jobless rate would end 2020 at 9.3%.

Yet the economy may be at a crossroads. States are allowing shuttered businesses to reopen, putting furloughed employees back to work and boosting growth. But Congress is deadlocked over a new stimulus to restore enhanced federal unemployment benefits and keep struggling small businesses afloat. The number of permanently laid off workers and bankrupt businesses is rising. And the specter of a second wave of the virus this fall looms.   

A look at the Fed’s views on:

Interest rates

All 17 Fed policymakers prefer no hikes from the near-zero federal funds rate through next year and the median projection is for no increases through 2023. But one official believes a quarter-point rate increase will be warranted in 2022 and four think the first move should come in 2023.

Bond purchases

The Fed said its massive bond purchases are now designed partly to juice the economy by lowering long-term interest rates, such as for mortgages, as well as ensure that markets run smoothly. Previously, the Fed said the purchases — of $120 billion a month in Treasury bonds and mortgage-backed securities — were aimed at reviving markets for those assets that virtually came to a halt early in the crisis.

The change eventually could pave the way for the Fed to buy bonds with longer-term maturities to more effectively push down long-term rates.

The economy

Fed officials predict the economy will shrink 3.7% this year, less than their 6.5% forecast in June. But they forecast growth of 4% in 2021, down from their prior 5% estimate, and 3% in 2022.

Gross domestic product plunged at a record 31.7% annual rate in the second quarter, a bit better than the initial 32.9% forecast.

The economy has bounced back faster than expected, largely as a result of stronger consumer spending, Goldman Sachs says. While COVID-19 surges in the South and West led some states to pause or reverse reopening plans, hospitalizations and death tolls have improved recently. IHS Market predicts growth of about 30% in the current quarter.

But Barclays says the recovery is likely to slow in the months ahead, in part because a snap-back in auto production to pre-pandemic levels has played out. Powell noted that many laid-off workers have stopped looking for jobs.

Jobs

Unemployment is projected to fall from the current 8.4% to 7.6% by the end of the year, 5.5% by the end of 2021 and 4.6% by the end of 2022, according Fed officials’ median estimate.

The economy has regained nearly half the 22 million jobs lost in the early days of the pandemic as businesses have reopen but economists say recouping the remainder will be tougher. The number of workers permanently laid off jumped from 2.9 million to 3.4 million in August, indicating some temporary layoffs have become permanent.

Of the 11 million idled workers who have not been called back or found new jobs, Powell said, “Our commitment is not to forget those people.”

Inflation

The Fed estimated its preferred measure of annual inflation will close out 2020 at 1.2%, up from its 0.8% forecast in June, before rising to 1.7% in 2021. A core measure that strips out volatile food and energy items is projected to end the year at 1.5%, above officials’ previous 1% prediction.

Inflation has picked up recently, chiefly because of a surge in used car prices and a partial rebound in apparel prices and air fares that were depressed by the effects of the pandemic.

Even before the crisis, inflation was held down for years by discounted online prices and the globally connected marketplace.  The Fed’s new policy framework aims to juice inflation but economists say there’s no guarantee it will work.

 While modest price increases are generally a good thing, persistently low inflation can lead to deflation, or falling prices, that prompts shoppers to put off purchases.

Curious about buying or selling a home in today’s market? Give us a call and let’s chat! Jennifer and Kevin Hanley, REALTORS The Hanley Home Team of Keller Williams Realty Atlantic Partners Southside http://www.HanleyHomeTeam.com

Consider this: When to refinance?!

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#Refinance, home ownership, Home values, interest rates, jacksonville area, Jacksonville Real Estate, real estate

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Refinancing your mortgage is something most homeowners consider at least once throughout the lifespan of their home loan. It allows you to pay off your previous loan by applying for a new one that has better financial advantages. While there are many good reasons to refinance, here are five common ones.

• Scoring a lower interest rate. The number one reason homeowners decide to refinance is to secure a lower interest rate on their mortgage. Not only does this save you money in the long run and decrease your monthly payment, but you can start building equity in your home sooner.
• Using an improved credit score. Even if interest rates have not dropped in the market, if you’ve improved your credit score over the last few years, you may be able to reduce your mortgage rate.
• Shortening the loan’s term. If interest rates are decreasing, there is a chance you may be able to get a shorter loan term with little to no change in your monthly payment, allowing you to pay off your loan sooner.
• Switching from an adjustable rate to a fixed rate. If you chose an adjustable-rate mortgage with great introductory rates when you initially financed your home, that rate may increase significantly over the years. By switching to a fixed rate while interest rates are low, you can protect yourself from future increases.
• Cashing out home equity. If there is a big purchase or payment on the horizon, such as funding a wedding or going back to school, your best option may be to use the equity you’ve built in your home to borrow money at a lower cost.

Give us a call today!  Kevin and Jennifer Hanley, REALTORS Keller Williams Realty Atlantic Partners Southside 904-515-2479 http://www.HanleyHomeTeam.com

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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

Homebuyers need to act now

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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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