In the housing industry mortgage interest rates are constantly fluctuating. With all the talk of jumps and declines in the past few months how do home buyers know when is the best time to buy? Borrowers who didn’t take advantage of the all time low mortgage rates of 3.35% in May are seeing a slow but steady climb since the beginning of July to an average rate for a 30-year fixed mortgage of 4.51%. The highest it has been since July 2011. However, mortgage rates which dropped after the financial crisis of 2007 and 2008 are still much lower than the average of about 5.3% for the past 10 years. Supply and demand will affect rates even more as buyers compete for a small supply of homes pushing house prices up. At the same time sellers are listing their properties before buyer demand dwindles. As interest rates increase, home sellers who worry that higher interest rates will reduce demands are going to rush to put their homes on the market. This will result in a sudden climb in inventory in the housing market. The increase in the supply of homes and at the same time higher interest rates will reduce demands for this new influx of homes.
With even a slight increase in mortgage rates lenders have to re-evaluate pre-approved loans from a few months ago because of the higher rates As mortgage rates increase housing affordability will decrease. This decrease in purchasing power will affect borrowers in two ways. Either an even slight increase will disqualify borrowers who just made it in the qualifying limits for a mortgage loan or borrowers will have to reassess their home purchase and settle for a smaller, less expensive home.
One way for home buyers to tackle the uncertainty of fluctuating mortgage rates is to get a mortgage rate lock float down. A mortgage rate lock float down ensures borrowers get the lowest mortgage rate even after locking in on a specific rate. However, if mortgage rates increase borrowers are still locked in at the original rate that was available when they signed the mortgage. Knowing when to jump into the real estate market is anybody’s best guess. Locking in on a mortgage rate can save borrowers thousands of dollars if rates suddenly increase and the float down option helps if rates manage to go down.
Aurora, a leading financial services company, has funded billions of dollars in loans across the United States and serves clients nationwide in more than 18 states and jurisdictions. A Direct DE FHA Lender, Aurora provides a broad range of financial products and services, including consumer banking and credit, corporate and investment banking. For more information on Aurora Financial, visit www.auroraf.com or call 1-(877) 887-1117.