With 2016 fast approaching, now is the time for renters to get off the sidelines, start organizing their finances and take on the excitement of homeownership.
But given the recent history of the housing market and Americans’ increasing need to stay mobile, it is understandable that it can be nerve-wracking to invest your hard-earned money in a home.
However, unlike years past, all key economic indicators are ripe and there are two major changes to the mortgage process that help make 2016 a good year to buy a home.
1. Rental rates continue to rise
With the on-going low supply and high demand of rental units, rental rates are continuing to rise. In the last 12 months, 88% of property managers have raised their rent prices. And there is no sign of that stopping given that 68% of property managers predict their rental rates will rise again in 2016.
2. Interest rates are historically low
Freddie Mac’s latest survey of lenders shows little change in the 30-year fixed-rate mortgages, which averaged at 3.89% for the month of September compared to 4.16% a year ago. Low interest rates make home buying more affordable.
3. Clear mortgage terms
The recent TRID announcement has mandated clearer terms at the closing table. For first-time homebuyers, this is a huge benefit because it will ensure there are no surprises at the closing table. These clear terms will help homebuyers better understand both their financial commitment and what is expected of them.
4. Down payment protection will be available
Writing a check for a down payment on a home is often one of the largest investments someone will make. Down payment protection is a new option that can give modern homebuyers the flexibility they need to more confidently and securely buy a home. When homebuyers put less than 20% down at closing, this kind of coverage protects their down payment just like private mortgage insurance protects the bank.
Given that the average employee tenure in the U.S. is 4.6 years overall, and 3 years for millennials, it’s understandable that the modern homebuyer may be nervous to commit to living in one location for an extended period of time.
However, the current state of the market and these major mortgage changes will help to ensure that when life happens, the homebuyer won’t be completely out of luck when it comes to protecting their nest egg.