by Kenneth Powell | Sep 22, 2024 | Home Buyers Guide
The world of real estate has always had its ebb and flow, but the pulse of today’s mortgage market offers a shimmer of hope for many homebuyers. As we step into late September, the news of falling mortgage rates has captured the attention of seasoned investors and first-time homebuyers alike. According to the latest Bankrate lender survey, 30-year fixed mortgage rates have dropped to an average of 6.20%. To put it in perspective, these rates haven’t been this low since 2022.
A Glimpse into the Recent Decline
It’s no secret that inflation plays a major role in the fluctuation of mortgage rates. The brighter inflation news over the summer triggered the initial fall in rates, setting the stage for what we’re seeing now. Market volatility temporarily boosted rates in August, but it quickly led to an even more significant decline. This week, the Federal Reserve’s decision to cut its benchmark interest rate by half a percentage point propelled mortgage rates to a 24-month low.
While some buyers are eagerly jumping into the market, others remain cautious, hoping for rates to drop even further. In fact, a June Bankrate survey revealed that nearly half (47%) of homeowners would only consider purchasing a home if rates dipped below 5%. This shows that despite the current favorable rates, many are still holding out for what they believe could be a once-in-a-lifetime deal.
How This Affects Homebuyers
To better understand how these lower rates impact prospective buyers, let’s compare top offers on Bankrate to the national average. As of September 15th, the top offers listed on Bankrate came in at 5.53%, which is 0.78% below the national average of 6.31%. If you’re looking at a $340,000 loan, this seemingly small difference could result in a whopping $2,045 in annual savings on your mortgage. Over the lifespan of a 30-year loan, these savings compound, making a significant difference in your overall financial picture.
Refinancing in the Current Market
If you already own a home, you might be wondering if now is a suitable time to refinance. The short answer is: absolutely. With the average 30-year fixed refinance rate at 6.12%, homeowners can benefit from a decrease of 23 basis points compared to last week. And if you’re considering a 15-year refinance, rates are currently averaging 5.40%, which is also on the decline. This means that homeowners with older mortgages locked in at higher rates may want to seriously consider refinancing to take advantage of these lower numbers.
A Historical Perspective on Rates
While today’s rates offer hope, it’s always important to keep historical context in mind. Just a year ago, mortgage rates were hovering above 7%, and even five years ago, they were closer to 4.5%. While the journey of interest rates is often unpredictable, the current trends suggest a gradual easing over the coming months. The question remains: how low can they go?
What This Means for You
Whether you’re considering buying your first home, refinancing, or simply monitoring market trends, it’s evident that the current landscape presents numerous opportunities. Now more than ever, it’s essential to compare mortgage offers and shop around to find the best rates. A small percentage difference can translate into thousands of dollars saved over the life of your loan.
Bankrate, for example, can connect you with various types of mortgage offers that often fall well below the national average. By examining the lender’s interest rate, APR (annual percentage rate), and estimated monthly payment, you can make an informed decision about which loan best suits your needs.
The real estate market, much like the mortgage rates, is dynamic. But with the right insights and strategy, today’s buyers and homeowners can position themselves to make the most of the opportunities presented by these falling rates.
If you’re ready to explore your options or need expert guidance, Kenneth Powell and the Realty One Group Performance team are here to help you navigate the current mortgage landscape with confidence. Contact us today at 240-237-7855 to start your journey toward homeownership or refinancing with ease.
by Kenneth Powell | Aug 13, 2024 | Home Buyers Guide
In real estate, even a slight change in mortgage interest rates can significantly impact a buyer’s purchasing power. When interest rates drop, it can make home ownership more accessible or allow a buyer to afford a more expensive property. In this post, we’ll explore how a reduction in the mortgage interest rate from 7.5% to 5.99% can increase a buyer’s purchasing power, providing more options and opportunities in the housing market.
The Power of Lower Interest Rates
Let’s consider two scenarios where a buyer is considering a mortgage with a $17,500 down payment but faces different interest rates.
Scenario 1: Interest Rate at 7.5%
- Monthly Payment: $4,323.71
- Purchasing Power: $500,000
Scenario 2: Interest Rate at 5.99%
- Monthly Payment: $4,323.71
- Purchasing Power: $560,000
With a lower interest rate of 5.99%, the buyer’s purchasing power increases from $500,000 to $560,000 while maintaining the same monthly payment of $4,323.71. Because of the reduction in interest rates, buyers now have the option of looking at homes in higher price ranges.
More Options and Negotiating Power
This increase in purchasing power not only allows the buyer to consider a wider range of homes but also provides them with more negotiating leverage. With the ability to afford a higher-priced home, the buyer can explore neighborhoods or properties that were previously out of reach. Additionally, the buyer can use this extra financial flexibility to negotiate better terms and compete with other buyers in highly competitive markets.
Bottom line
The drop in interest rates from 7.5% to 5.99% has a substantial impact on what a buyer can afford, increasing their purchasing power from $500,000 to $560,000. In the above scenario, all things being equal, the mortgage on the $500,000 home decreased from $4,323.71 to $3,839.73. That is a $484 difference in monthly payments. This boost gives buyers more options in the housing market and enhances their ability to negotiate favorable terms. As interest rates fluctuate, understanding how these changes affect your buying power is crucial for making the most informed real estate decisions. It’s a great time for you to contact a lender to determine your buying power and financing options.
Bill Saunders
Branch Manager | NMLS #455891 3140 W Ward Rd., Suite 101 & 102 Dunkirk, MD 20754 M: 301.440.9102
Marvin Calder
NMLS# 1094002 Sales Manager (443) 294-5738 office (240) 723-4212 cell (443) 294-5738 fax
JEFFREY HALBERT
Branch Sales Manager | Loan Originator phone: (301) 327-5803 | cell: (301) 802-1944
by Kenneth Powell | Jul 23, 2024 | Home Buyers Guide
Purchasing a home can be both an exciting and daunting experience, especially when the property requires renovations or improvements. Two popular financing options that can help homebuyers in Prince George, Calvert, St. Mary’s, Charles, and Anne Arundel counties are the FHA 203(k) loan and the Fannie Mae HomeStyle loan. These loans offer unique benefits and can make it easier to buy and renovate a home. This guide will explain each loan type in detail, helping you make an informed decision.
Homebuyers can finance both the purchase and renovation of a property with the FHA 203(k) loan, a government-backed mortgage. The Federal Housing Administration (FHA) offers this loan, which can be especially advantageous for buyers considering homes that require significant repairs or upgrades.
Key Features of a 203(k) Loan:
- Single Loan for Purchase and Renovation: Combines the cost of purchasing the home and the cost of renovations into a single mortgage.
- Low Down Payment: This requires a down payment as low as 3.5%, making it accessible to more buyers.
- Flexibility in Property Types: Can be used for single-family homes, multi-family properties (up to four units), and certain approved condominiums.
- Two Types of 203(k) Loans:
- Standard 203(k): When undertaking more extensive renovations surpassing $35,000, like structural alterations or room extensions,
- Limited 203(k): For minor repairs and improvements under $35,000, such as painting, new appliances, or minor kitchen renovations.
- Renovation Timeline: You must complete all renovation work within six months of the loan closing.
Eligibility Requirements:
- The loan must meet standard FHA loan requirements, including credit score and debt-to-income ratio criteria.
- The property must be at least one year old.
- Renovation costs must be at least $5,000.
- A qualified contractor must supervise renovations and the FHA must approve them.
What is a HomeStyle Loan?
The Fannie Mae HomeStyle loan is a conventional loan that allows homebuyers to finance both the purchase and renovation of a home. Unlike the 203(k) loan, the HomeStyle loan is not government-backed, but it offers similar benefits for buyers looking to purchase fixer-upper properties.
Key Features of a HomeStyle Loan:
- Single Loan for Purchase and Renovation: Combines the cost of purchasing the home and the cost of renovations into one mortgage.
- Higher Loan Limits: Compared to the 203(k) loan, it allows for higher renovation budgets, making it suitable for more extensive home improvements.
- Wide Range of Eligible Properties: Can be used for single-family homes, multi-family properties (up to four units), condos, and even vacation homes.
- No FHA Fees: Because it is a conventional loan, it avoids some of the fees associated with FHA loans, such as the upfront mortgage insurance premium.
- Flexible Renovation Options: Can be used for luxury upgrades and improvements, such as swimming pools or high-end kitchens.
- Renovation Timeline: You must complete all renovation work within 12 months of the loan closing.
Eligibility Requirements:
- The candidate must meet standard conventional loan requirements, including a higher credit score compared to FHA loans.
- The down payment requirement is typically higher than the 203(k) loan, often around 5%.
- A licensed contractor must complete the renovations and Fannie Mae must approve them.
- Before the loan closes, you must submit and approve detailed renovation plans and cost estimates.
Select the Appropriate Loan for Your Requirements
When deciding between a 203(k) loan and a HomeStyle loan, consider the following factors:
- Loan Limits and Budget: If your renovation budget is higher, the HomeStyle loan might be a better fit due to its higher loan limits.
- Property Type: You can use both loans for a variety of property types, but the HomeStyle loan offers more flexibility, including vacation homes.
- Credit Score: If you have a lower credit score, the 203(k) loan might be more accessible due to its more lenient credit requirements.
- Down Payment: Consider how much you can afford to put down. The 203(k) loan offers a lower down payment option.
- Renovation Scope: For luxury or non-essential improvements, the HomeStyle loan provides more flexibility.
Both the FHA 203(k) and Fannie Mae HomeStyle loans can be powerful tools for homebuyers looking to invest in a property that needs work. Understanding the features and requirements of each loan allows you to make an informed decision that aligns with your financial situation and renovation goals.
If you have any questions or need further assistance, feel free to contact me, Kenneth Powell, at Realty One Group Performance. You can reach me at 240-237-7855 or through my contact form.
by Kenneth Powell | Jul 17, 2024 | Home Buyers Guide
If you’re looking to buy a house in Southern Maryland, specifically in Calvert County, Charles County, or St. Mary’s County, a USDA loan could be a perfect fit for you. With USDA loans, low- to moderate-income families can achieve the dream of homeownership in eligible rural areas. Let’s dive into the details of what a USDA loan is, its benefits, eligibility requirements, and more.
What is a USDA Loan?
For qualified rural and suburban homebuyers, a USDA loan with backing from the United States Department of Agriculture offers affordable home financing options. This loan program aims to improve the economy and quality of life in rural America by providing low-interest mortgages with zero down payments.
Benefits of a USDA Loan
- No Down Payment: One of the most significant benefits is the ability to purchase a home without a down payment.
- Competitive Interest Rates: USDA loans often come with lower interest rates compared to conventional loans.
- Flexible Credit Requirements: USDA loans have more lenient credit requirements, making them accessible to a larger number of buyers.
- Low Mortgage Insurance: The mortgage insurance premium for USDA loans is lower than that of FHA loans, reducing monthly payments.
Eligibility Requirements
1. Location Eligibility
Rural and suburban areas are the target audience for USDA loans. In Southern Maryland, many areas in Calvert County, Charles County, and St. Mary’s County qualify. To check specific property eligibility, you can visit the USDA’s property eligibility site here.
2. Income Requirements
USDA loans have income limits based on the size of the household and the area’s median income. The income limits are adjusted annually. For the most recent income limits, refer to the USDA income limits documentation. As a general guideline:
- Moderate income is defined as 115% of the area’s median income.
- For a family of 1-4 members, the income limit is approximately $90,300.
- For a family of 5-8 members, the income limit is around $119,200.
3. Credit Requirements
The USDA does not set a minimum credit score requirement, but lenders typically require a score of at least 640 to qualify for the program’s automated underwriting system. Those with lower scores can still qualify with manual underwriting, given that they meet other financial standards.
4. Property Requirements
The property must meet USDA property requirements, such as adequate size, functional utilities, adherence to safety standards, and serving as the primary residence.
Cities in Southern Maryland Qualify for USDA Loans
These cities and surrounding areas offer potential homebuyers the opportunity to benefit from USDA loan advantages.
Contact an approved lender.
For personalized assistance with USDA loans in Southern Maryland, you can contact Jeffrey Halbert, an approved lender. His expertise can guide you through the process, ensuring you take full advantage of the USDA loan program.
Contact Information:
By leveraging a USDA loan, you can make your dream of owning a home in Southern Maryland a reality. Whether you’re looking at a cozy house in Lusby, a townhouse in Lexington Park, or any other eligible area, USDA loans provide a path to affordable homeownership.
For more detailed information, contact realtor Kenneth Powell or Jeff Halbert today.
by Kenneth Powell | Jul 13, 2024 | Home Buyers Guide
Misconceptions can easily ensnare you in the constantly changing housing market. Let’s discuss three common real estate myths and uncover the truths behind them.
Myth 1: You Need a 20% Down Payment
Myth: You need a 20% down payment to buy a home. Truth: Not anymore! Many lenders offer loans with much lower down payments, some as low as 0-5%. Additionally, there are various assistance programs for first-time buyers, such as the MMP, Chenoa, USDA Loan, VA Loan, and special grants available based on location and occupation. These programs can significantly lower the barrier to homeownership.
Myth 2: The only ideal time to buy is spring.
Myth: Spring is the only ideal time to buy a home. Truth: While spring is typically a busy season, excellent deals are available throughout the year. Home prices tend to rise month by month, so purchasing as early as possible can be advantageous. Every season offers unique opportunities in the real estate market.
Myth 3: It’s Always Better to Buy than Rent
Myth: It’s always better to buy than rent. Truth: The decision to buy or rent depends on your circumstances. Homeownership can be a wise investment and a wonderful way to accumulate wealth. In Maryland, home appreciation increased by an average of 6% in 2024, with Charles County seeing over 8% and Calvert County over 10.6%. Homeowners who bought in 2021 have experienced significant increases in home equity, whereas renters have faced rising rents. Before making a decision, consider factors such as lifestyle, job security, and financial readiness.
According to the Federal Reserve, homeowners had a median net worth of $396,200 in 2022, compared to renters, who had a median net worth of just $10,400. This stark difference highlights the financial benefits of homeownership.
For more tips and information, visit contact Ken Powell at 240.237.78555. Stay informed and make the best decisions for your real estate needs!
by Kenneth Powell | Jun 7, 2024 | Home Buyers Guide
When you’re in the market for a new home, you might come across a term that can potentially save you money and simplify the buying process: loan assumption. It’s crucial to understand what a loan assumption is, the types of loans it can assume, and the financial implications involved. This guide will help you navigate this option and decide if it’s the right fit for you.
What is a Loan Assumption?
Loan assumption occurs when a buyer takes over the seller’s existing mortgage. The buyer assumes the remaining balance, interest rate, repayment period, and other terms of the original loan. This can be particularly advantageous in a market with rising interest rates, as it allows the buyer to lock in an older, potentially lower rate.
Types of Loans That Can Be Assumed
Not all loans are assumable. In general, we can assume the following types of loans:
- FHA Loans: The Federal Housing Administration (FHA) allows loan assumptions. FHA loans are popular among first-time homebuyers due to their low down payment requirements and more lenient credit standards.
- VA Loans: Veterans Affairs (VA) loans are assumable, and you don’t necessarily need to be a veteran to assume a VA loan. However, if the new buyer is not a veteran, the original seller may lose their VA loan entitlement until the loan is fully repaid.
- USDA Loans: You can also assume the United States Department of Agriculture (USDA) loans, which are a good option for purchasing a rural home.
Financial Considerations for Loan Assumption
While loan assumptions can be beneficial, they come with specific financial considerations. The buyer must either obtain a second loan to cover the difference between the current mortgage balance and the sale price or bring enough cash to settlement to cover the difference and closing costs.
Example Scenario
Let’s say you’re buying a home for $300,000. The seller’s existing mortgage balance is $200,000, and the interest rate is lower than current market rates, making it an attractive option to assume. Here’s how you might handle the financial aspects:
- Mortgage Balance: $200,000 (to be assumed)
- Sale Price: $300,000
- Difference: $100,000
You have two options:
- Obtain a Second Loan: You could take out a second mortgage for $100,000 to cover the difference. This would mean you now have two loans to manage: the assumed mortgage and the new second mortgage.
- Bring Cash to Settlement: If you have sufficient savings, you could bring $100,000 in cash to the closing to cover the difference between the sale price and the assumed mortgage balance.
Additionally, you will need to account for closing costs, which can include fees for the loan assumption process, title insurance, and other related expenses.
Pros and Cons of Loan Assumption
Pros:
- Lower Interest Rates: If the current interest rates are higher than the seller’s mortgage rate, you could save significantly over the loan’s lifetime.
- Reduced Closing Costs: Assumed loans might have lower closing costs compared to taking out a new mortgage.
Cons:
- Large Cash Requirement: To cover the difference between the sale price and the mortgage balance, you may need significant cash.
- Second Loan Complications: If you take out a second loan, managing two separate loans can be complex and potentially more costly in terms of interest and fees.
Summary
Loan assumption can be an excellent option for homebuyers, especially in a high-interest-rate environment. Understanding the types of loans that are assumable and the financial commitments involved allows you to make an informed decision that aligns with your financial situation and homeownership goals. Always consult with a real estate professional and a mortgage advisor to explore all your options and ensure you’re making the best choice for your unique circumstances.
If you have any questions or need further assistance, feel free to contact us. We’re here to help you navigate the home-buying process with ease and confidence.
