mortgage

Swap Your Monthly Rental with a Mortgage

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Renters are facing a huge problem as rents soared across the country. According to Newsweek, the average rent nationwide reached a record $1,219.00 as of June 1, 2021. It is now even higher than pre-pandemic levels. Experts state that when rent goes up, it rarely comes down.

Zumper reports that for June 2021, the median rent for a two-bedroom unit in the national index increased by 6.5 percent year-over-year. It increased by 4.9 percent year-over-year for a one-bedroom unit. Since the start of the pandemic, the highest increases of up to 15 percent were in the suburbs of Dallas and Fort Worth.

For renters who have a steady income and enough margins to qualify for a mortgage, this could be the right time to apply for one. Instead of paying a landlord steadily increasing sums monthly, those payments can go to a mortgage and pay for homeownership instead.

National Association for Realtors (NAR) chief economist Lawrence Yun told Bloomberg this month that as housing prices reached 30-year record highs in 2020, homeowners gained an estimated $45,000 in home equity. That is something that renters can look forward to if they own a home.

Availability of Houses Improved

CNBC reports that according to Redfin, the month ending on July 4 this year saw an increase of four percent in new house listings compared to that period last year. For the first time, the numbers were higher than pre-pandemic levels, with a three percent increase from 2019.

According to Realtor.com, the number of available houses for sale increased by 10.9 percent from May to June this year. Compared to last year, the number increased by 20 percent or more in the top 10 markets of the largest U.S. cities.

Realtor.com senior economist George Ratiu told Millionacres that in the 13 weeks leading up to June 29 this year, 11 weeks showed more new listings than the same periods in 2020.

High Prices Still Unaffected

Unfortunately, the slight increase in housing availability has not yet affected high housing prices. Bankrate cites data from the NAR that housing prices in May 2021 are 23.6 percent higher than in May 2020.

ATTOM Data Solutions statistics show that housing affordability has plunged below historical averages in 61 percent of U.S. counties. According to First American insurer, housing affordability decreased in 45 out of the top 50 U.S. markets. The biggest differences were in Phoenix, Tampa, and Kansas City.

Favorable Mortgage Rates

Doug Duncan, Fannie Mae’s chief economist, highlights that mortgage rates are still within the range of historical lows. Daryl Fairweather, Redfin’s chief economist, notes that mortgage rates are below three percent once again and are likely to remain low. Potential homebuyers must take advantage of this period to lock in a favorable rate.

According to Business Insider, as of July 17, 2021, the average mortgage rate for a 15-year fixed loan is 2.43 percent. For a 30-year fixed loan, it is 3.33 percent. For a 7/1 adjustable-rate mortgage (ARM), it is 4.09 percent. For a 10/1 ARM, it is 4.11 percent. For a 30-year Federal Housing Administration (FHA) loan, it is 2.63 percent. For a U.S. Department of Veterans Affairs (VA) loan, it is 2.74 percent. These are averages from the offerings of various mortgage lenders for the day.

Each mortgage lender varies in its offerings. This also varies for each loan applicant depending on various factors. It is best to use a reliable home loan comparison tool to find the best rate.

Preparing to Apply for a Mortgage

When applying for a mortgage, an individual or a couple must first account for all net income and all monthly expenses. Regular quarterly or annual expenses such as insurance payments must be divided into their monthly equivalents and included in the expenses. Only then will they determine the remaining amount that can be allocated for a monthly amortization. They must leave enough margins for emergency expenses and savings.

Once they have found that they can afford a certain monthly mortgage, they can prepare the other requirements. They must find their FICO credit score, which is available for free online. They must also gather all the documents that prove their regular income.

The easiest housing loan to apply for is an FHA loan. An applicant can be approved with even a credit score of only 620. This means paying a down payment of 10 percent of the home price, though. With a higher score, the applicant can get a lower down payment of up to 3.5 percent of the home price. This will mean having to secure mortgage insurance, though.

After gaining approval, the applicant must ask for a pre-approval letter from the mortgage lender. This is shown to the seller to prove readiness to purchase a home. The potential homebuyer can then go house hunting.

Villa Hope Content Team