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Will mortgage rates finally normalize?

Luxury Home buyers

Not all Luxury Home buyers pay cash.

While rates are certainly not likely to dip back down to the record lows of 2020 through quarter one of 2022, mortgage rates do seem to be stabilizing. Top chief financial analysts are predicting slightly lower rates by this quarter’s conclusion and into quarter four.

CoreLogic’s Hepp foresees rates for a 30-year fixed mortgage loan averaging around 5.5 percent through the third quarter. However, if the Fed raises rates by another 75 basis points at their September meeting, that could change, she says: “That may cause another surge in mortgage rates prior to the meeting, similar to what happened in June. If inflation expectations along with weaker demand leads to disinflationary pressures, mortgage rates are likely to remain at 5.5%, or even decline to about 5.375%.”

What this means for homebuyers and sellers

More inventory is coming into the market, but this remains a seller’s market. However, hopeful buyers should not necessarily sit on the sidelines as they miss out. Buyers who have lost out on countless contracts over the last two years may want to approach the market again. They will see less competition and are unlikely to see the bidding wars of the last two years. It is important for sellers to be realistic about price expectation. Being patient is key — there are still many interested buyers out there.

Creativity is key making homebuyers payments affordable

With rising inventory and less bidding wars with sellers, well-qualified buyers have a bit more of an advantage than in the past with the home buying process. Sellers are more likely to offer or accept a purchase agreement from a buyer with a contribution towards buyers closing costs. These credits would allow the buyer to apply the credit, and/or their own funds towards buying down their interest rate making the payment more affordable.

Principal Mortgage Insurance or PMI is necessary when putting less than 20% down payment on a new home purchase. What most buyers do not know is that PMI can be bought out, so the buyer has a lower payment. On a $300,000 home purchase with 15% down the PMI could be as low as $50 to $150 per month or could be bought out with an estimated $2,000 out of pocket in closing costs. A 15% down payment plus the extra $2000 PMI buyout is a savings of $13,000 in out-of-pocket funds compared to 20% down and the PMI would not be paid monthly so a much lower payment.

In turn, lenders need to be creative and give many different options to each future homebuyer with options that would be beneficial to the buyer. This way the buyer is extremely educated on their loan when making an offer in order to have the best terms possible. With the rising inventory and rates, sellers will be more motivated to negotiate or accept these types of offers.

In Conclusion, with a slight housing market slow down, higher interest rates and market instability, it is still a great time to buy a home. The current housing market adjustment is very healthy for our economy and helping buyers with the home buying process and qualifications. The rising inventory is keeping the values high but also reducing the bidding wars with the sellers and allowing the buyers to possibly get closing costs credits as well.

Contact Eddie at https://planethomelending.com/Eddie-Rizk for more info!

Edward L. Rizk
Mortgage Loan Originator -NMLS #1696816
Planet Home Lending – NMLS ID #17022
2485 Village View Dr. Ste 150
Henderson, NV 89012