by Maurie Backman | Sept. 10, 2020
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There's a reason mortgage activity surged in 2020's second quarter.
If you follow the news, you may have heard that mortgage rates have hit historic lows this year. And data from Black Knight confirms that borrowers are taking advantage of them.
There were nearly $1.1 trillion in new mortgage originations in the second quarter of 2020. That's the largest quarterly volume on record. But should you get a mortgage now? Or are you better off waiting, despite the fact that so many buyers are moving forward with home loans these days?
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Low rates make it appealing to apply for a mortgage today. And you should consider doing so if:
There's limited inventory on the housing market right now. If you've managed to find a home that suits your style and has the amenities you want, then it pays to move forward, especially if the price is right. It might also make sense if the property can be fixed up to look the way you want it to.
You'll generally need a credit score of 620 or higher to qualify for a mortgage, but that won't give you the best rates out there. To snag those, you'll probably need a score in the mid-700s or higher. If your credit score is good or excellent, it may be a good time to apply -- especially if you shop around with different mortgage lenders to find the best deal.
Once you sign a mortgage, you'll have to make monthly payments of principal plus interest. But that's not all. You'll also need to cover the cost of property taxes, homeowners insurance, maintenance, and possibly added costs like private mortgage insurance and HOA fees. Take a look at your budget and calculate whether your income supports your housing costs. If it does, you should feel comfortable putting in mortgage applications.
Just because mortgage rates are low doesn't mean it's the ideal time for you to make a home purchase. You should consider holding off on signing a mortgage if:
Now's not the right time to buy if you don't have the funds available for a 20% down payment, or you're worried your income isn't high enough to cover the many costs of homeownership. You're better off waiting until you've saved more and are earning more money.
There's a housing shortage on the market today, which means you have a lower chance of finding a home that meets your personal requirements. If you're not seeing homes you'll be happy with, then there's no sense in spending a small fortune to own one.
Maybe you're finding nice homes, but you can't really afford them. Pushing yourself outside your financial comfort zone is a decision that could come back to haunt you -- especially if you end up falling behind on your housing payments.
A credit score in the mid-600s won't give you the fabulous mortgage rates you keep hearing about. If your credit needs work, it pays to hit pause on your home-buying plans and instead take steps to bring your score up. You can do so by paying incoming bills on time, eliminating a chunk of outstanding credit card debt, and correcting errors on your credit report. You can access weekly credit reports for free during the coronavirus pandemic.
Mortgage activity may have been booming this past quarter, but that doesn't mean you should apply for a home loan. Rather than worry about missing out, think about your personal financial circumstances. You're better off buying a home at the right time for you, even if it means you end up with a slightly higher mortgage rate.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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