by Maurie Backman | Jan. 31, 2021
Buyers have been clamoring for mortgages. Should you be?
You may have heard that mortgage rates have been sitting at or near historic lows for the past several months, and that's definitely fueled buyer interest. According to the Mortgage Bankers Association, as of December 2020, mortgage applications for newly built homes climbed 42.2% compared to December of 2019. But while a lot of people are hurrying to get mortgages these days, should you be doing the same?
If you're a good mortgage candidate and want to buy a home today, there's a strong chance you'll score an unbelievably low interest rate on your home loan. As of this writing, mortgage rates are averaging:
Of course, these stats represent average rates on a national level, and rates may be more or less competitive where you live. But given how attractive they are on a whole, that alone makes it a good time to buy.
On the other hand, there's not a lot of housing inventory available on the market today, so if you attempt to buy right now, you could get stuck settling for a property that doesn't really check all the right boxes. Also, home prices have risen substantially in the past year, so if you buy today, you may find that your mortgage interest rate savings are offset or wiped out by a higher home purchase price.
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Clearly, you can make the argument that now is both a good time and a bad time to buy a home. But another thing to think about is how likely you are to get approved for a mortgage, and how likely you are to snag the competitive rates mentioned above (or anything close).
To qualify for a great mortgage rate, you'll need:
If you don't meet that criteria, your mortgage application may be denied, or you may get approved for a loan at a higher interest rate than you want to pay. So before you contemplate whether you should buy a home now, think about how you'll come across to mortgage lenders. If your credit score could use some work, for example, it could pay to wait a few months, boost it, and then apply for a home loan. Similarly, if you're carrying a lot of debt, it could make more sense to spend a few months paying it down and then submitting your mortgage applications.
While it's true that rates are extremely competitive right now, there's a good chance that mortgage rates will stay low for the rest of the year, and possibly beyond. That doesn't mean they won't climb a little, but for the most part, industry experts don't anticipate any extreme jumps this year. As such, if you're not sure now's a great time to get a mortgage, hold off. See if housing inventory opens up and invest some time into making yourself a better loan candidate. That could, in turn, result in even more savings for you.
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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