Mortgage Market Update

Mortgage Market Update

A recent post by the National Association of Realtors (NAR) revealed that in the months of December 2014 through February 2015, there was an increase in the number of first-time buyers making a down payment of 6% or less as compared to last year:
2014: 61% of first time home buyers
2015: 66% of first time home buyers
First-time home buyer programs with low down payments are abundant again in 2015. In conjunction with continued low interest rates, these programs make this an attractive real estate market for first-time home buyers. An overview of these programs is as follows: First-Time Home buyer Grant Program: This program allows for a $5,000 grant toward down payment ($7,500 for police/fire/hospital employees) for first-time home buyers with income below the qualifying limit. The grant is forgiven on a pro-rated basis over a five year period. VHDA Plus 100% Financing Program: This state bond program is by far the most popular first-time home buyer program as it allows for no down payment for first-time home buyers. Low rates are another great feature of this VHDA Plus 100% program. Income limits do apply. USDA 100% Financing Program: This is not your father’s farm loan anymore! USDA financing is available in designated “rural” areas and offers attractive rates for those who qualify. Once again, income limits do apply.

Rates in general have increased slightly over the past few weeks. While rates remain near historic lows, the prognosticators call for increased rates for the remainder of 2015 and into 2016:

Freddie Rates

The above chart indicates that now may be a great time to jump into the housing market before increased rates eat into a buyer’s purchasing power. For example, the below chart shows at a rate of 4.00%, a $1,862/mo principal & interest payment would qualify a borrower for a $390,000 mortgage whereas at a rate of 4.75%, a $1,878/mo payment would qualify the same
borrower for a $360,000 mortgage:

Purch Power

In short, a buyer’s purchasing power would decrease by about 7.5% if mortgage rates were to increase from 4.00% to 4.75%. With potentially higher rates on the horizon, this may be a great time to jump into the real estate market.

Source: Tony Denk, Presidential Mortgage, tony.denk@presidential.com