Mortgage Rates For First Time Home Buyers

Mortgage Rates For First Time Home Buyers – Ron Magon has a clear view of New Hampshire’s small bank home mortgage market today. “So much has dried up,” said the president and CEO of Franklin Savings Bank.

Home prices in the state remain at all-time highs, and home sales continue to be dominated by non-essential cash purchases. Inflation and rising gas prices add to everyday expenses, making the prospect of a large home loan attractive.

Mortgage Rates For First Time Home Buyers

“The cost of getting a mortgage and the affordability of mortgages have changed dramatically for a number of reasons,” Magon said.

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This year, homebuyers face another hurdle: rising mortgage rates. At the end of 2021, the 30-year fixed mortgage rate rose to 3.1 percent. If someone buys a $400,000 home with a 5 percent down payment, that’s $1,623 a month over 30 years, according to the New Hampshire Housing Finance Authority.

This interest rate was 5.5 percent at the beginning of June. The Housing Finance Agency found in its monthly report that a buyer buying the same home today would pay $2,158 a month.

As mortgage rates rise, the monthly payments on a 30-year fixed mortgage rise. (Screenshot: New Hampshire Housing Finance Authority NH Housing Market Report, June 2022)

“Interest rates are still not historically high, but they are much higher than they have been in some time,” said Rod Depis, CEO of the New Hampshire Housing Finance Authority.

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As inflation continues to rise and the Federal Reserve continues to raise the federal funds rate to address it, mortgage rates in New Hampshire are following suit. Some housing experts hope it will help cool the buying frenzy of the past two years.

“As mortgage rates rise, inventory sits on the market for a while, making inventory levels more normal,” said Suzanne Damon, a realtor with Re/Max Damon’s home team in Manchester. “We’re already seeing a slowdown in how fast home prices are rising.”

“Because right now buyers are facing a double whammy: prices are going up and prices are going up,” he said.

But that recession could come at a cost: Higher interest rates are likely to make it more expensive for low- and moderate-income homebuyers. Even if the housing market starts to stabilize in the long term, these home buyers are likely to be pushed into the rental market in the short term.

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“A lot of people can’t afford to pay more, so a lot of homebuyers are being priced out of the market,” Depis said. “…It destroys demand, and unfortunately, the demand that is destroyed is at the bottom of the market.”

Magan agrees. “For those trying to find affordable housing, many are not available right now.”

New records have been created in house prices in the state. (Screenshot: New Hampshire Housing Finance Authority NH Housing Market Report, June 2022)

The double-edged sword underscores a fundamental problem in the Granite State: Although tight fiscal policy has curbed unprecedented demand here, the country still doesn’t have enough housing to hold down housing prices or stabilize demand, observers say. .

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“Inventories have fallen to fairly unhealthy levels over the last 10 years,” Depis said. “It probably will to some extent. It gives a little more choice for people who can afford to buy, but it doesn’t help a lot of people who are feeling the effects of the housing market.

The higher rates come after the Federal Reserve signaled its intention to raise the federal funds rate again this week, with last week’s data showing the fastest rate of inflation since 1981. The Street Journal reported on Monday that the big increase came after the Fed raised interest rates by half a percentage point in May.

This increase in speed has already changed the behavior of many granite stators. According to the Housing Finance Agency, the number of households refinancing their home fell by 55 percent between April 2021 and June 2022, after rising sharply two years earlier.

High interest rates have not yet slowed the flight of new home offers from the market. According to the Housing Finance Agency, the state’s current active listings sell out within a month if no new listings come in — well below the full six-month rate. Despite the expected summer listings, the total number of listings is at a 10-year low.

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But if sales are still going strong, the intensity of buyers will soften somewhat. Brokers say the number of buyers flocking to regular listings in 2020 and 2021 has dwindled to three or four. Economic realities seem to be taking their toll.

Home listings in New Hampshire are at a 10-year low. (Screenshot: New Hampshire Housing Finance Authority NH Housing Market Report, June 2022)

Inflation also affects the housing market. The price of building materials has skyrocketed in recent years, and inflation is hampering construction and slowing the supply of new housing. New single-family permits hit a 13-year high in 2021, but have slowed in recent months.

At the same time, higher costs can reduce consumers’ ability to make higher monthly mortgage payments, putting some buyers away, Depis added.

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“Homebuilders are being squeezed from both sides as their costs for labor and materials increase,” Depis said. “These buyers’ ability to pay is reduced because interest rates are high.”

Higher rates may create a short-term barrier for some families to find affordable housing. But Damon said it benefits others — especially people who use government programs to subsidize their purchases and mortgages. As fewer buyers search for listings, these buyers have seen more success recently.

“I think what it will help our market is we’ll be able to compete a little bit better with FHA buyers, (Veterans Affairs) buyers, our government-financed buyers and first-time homebuyer programs. . in the market,” he said. “I think it’s very useful.”

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Ethan DeWitt is an education reporter for the New Hampshire Bullet. He previously served as the Concord Monitor’s New Hampshire State House reporter, covering the state, legislature and New Hampshire presidential primary. Ethan Keane of Westmoreland began his career as a politics and health reporter at the Sentinel. Email: [email protected]When it comes to buying a home, there are many different types of mortgages available to first-time home buyers. One type of mortgage that has become more popular in recent years is the interest-only mortgage. This type of mortgage allows the homebuyer to pay only interest on the loan for a set period of time, usually five to ten years, before the principal is repaid. While an interest-only mortgage may be the best option for some home buyers, it’s important to understand its pros and cons before deciding if it’s right for you.

1. Lower monthly payments: One of the biggest advantages of interest-only mortgages is that they offer lower monthly payments than conventional mortgages. This can be especially attractive to first-time home buyers who are trying to reduce monthly expenses while settling into a new home.

2. Limited time frame: It is important to note that an interest-only mortgage is not a permanent solution. After the initial interest-only period ends, you must start repaying the principal as well. This means your monthly payments will increase significantly, so it’s important to be prepared.

3. Higher interest rates: Interest-only mortgages have higher interest rates than conventional mortgages because they pose more risk to the lender. This means you will pay higher interest rates over the life of the loan than with a regular mortgage.

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4. Potential to build equity: Despite the risks associated with interest-only mortgages, they can help you build equity in your home faster than a traditional mortgage. Because during an interest-only period, all your payments go into interest, meaning your principal remains the same. However, if the value of your home increases during this time, you will be able to reap the price increase when you sell the property.

5. Not for everyone: Generally, interest-only mortgages are not the right choice for everyone. Quality and weight are important when considering this type of mortgage

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