Mortgage rates are going up. According to an article by Fortune, Freddie Mac reported an average fixed mortgage rate of 4.67% at the end of March – up from 3.11% in December of last year.* Therefore, home buyers need to do their due diligence before purchasing a home.
READ ALSO: The 3 hottest neighborhoods in Arizona
Below are the answers three pressing questions you need to know about the spike in mortgage rates:
1. Does the increase in mortgage rates mean a crash is on its way?
Although the mortgage rate spike is a tactic by the Federal Reserve to try and calm inflation levels near 40-year highs, it is difficult to predict whether there will be a “crash” in the future. Real estate, specifically in Phoenix, is booming for more reasons than simply low mortgage rates. People have been moving to Arizona due to the flexibility to work from home, the beautiful weather and the growing economy. Therefore, it is unlikely that housing prices will suffer a serious decrease in value. If you are waiting for a crash to happen before purchasing a home, it might be a very long time before this occurs, if at all.
2. What type of lender should I speak with?
There are a variety of lenders out there to choose from. It’s important that you work with a lender who is well versed in loan originations and products of all types. In addition, it is very important that your lender, or loan officer, access your own personal needs and goals. Buying a home is the single largest investment you’ll likely make in your life. It’s not something to take lightly. Here are two places you can go to get a home loan:
Mortgage Lenders: These types of lenders will have an array of different loan products. They will utilize an array of different types of loans to ensure your needs and goals are being met. These lenders focus solely on mortgages and do not sell any other products or services. For example, at Minute Mortgage, we cut out unnecessary steps in the loan process and provide a transparent experience for all parties involved (loan officers, agents and homeowners).
National Depository Banks or Credit Unions: You can go directly to your bank or credit union and apply for a home loan. Banks and credit unions provide an array of products including home loans.
3. How do I make sure that I’m not stuck with a mortgage payment that I cannot afford?
Work with your mortgage lender to figure out the best mortgage to meet your monthly payment goals. This will help to figure out the range of home values or purchase prices you should be looking at. Most mortgages are set up to include property taxes and insurance and a guaranteed timeframe in which the debt will be paid off. Setting up the right mortgage with the right monthly payment to suit your needs will help you to adhere to a realistic monthly budget. In addition to your monthly mortgage payment, you’ll also budget out for any homeowner’s association fees and other household and overall living expenses. Once you figure out the right mortgage payment and purchase price of a home, it is very important to work with a real estate professional to ensure you get into the best property possible to fit your needs.
Overall, it’s important to conduct loan research before putting an offer on a house. These answers will help you get started on your journey towards becoming a homeowner!
Author: Brooke Dalzell, senior vice president of mortgage production at Minute Mortgage, has over 20 years of experience in her industry. She was the first employee of Minute Mortgage and helped build out a fully operational mortgage bank from the ground up. Dalzell is a multi-state licensed loan officer and manages a team of loan officers across the country. She is a public speaker and educates real estate agents and clients on the ins-and-outs of mortgage lending.