What Is The True Cost of Mortgage Payments?
Since the beginning of the housing crisis, in 2008, there have been many up and downs in the housing market. Some potential homebuyers have found it difficult to purchase a home, while others, along with real estate investors and home flippers, have taken advantage of the crisis and had great success. As the housing crisis comes to an end, many changes are taking place that could cause mortgage rates to grow for many homebuyers.
Although mortgage rates have remained low in 2014, despite predictions by industry analysts that rates would increase as high as 5.5 percent, there is still a lot of uncertainty about where mortgage rates are headed. Many experts still believe we could see a rise in interest rates once The Federal Reserve discontinues its campaign to help drive down long-term loans.
In November 2014, our nation’s bank for banks will stop purchasing debt that has driven down mortgage rates since 2012. A sudden increase in interest rates at the end of 2014 or the beginning of 2015 would greatly increase the cost of mortgages for soon to be homebuyers.
Another factor that could result in higher mortgage costs for homebuyers are the guidelines that the lenders must follow in order to meet federal qualified mortgage standards. If lenders fail to meet these standards, they could face large penalties, as well as lawsuits from borrowers with failed loans. These standards will force homebuyers to face more scrutiny during the approval process, which could lead to tighter rules and much higher interest rates.
As our nation continues to recover from the recession, the housing market has begun to boom once again in certain regions of the country. This has caused the cost of homes to rise, especially in areas with low unemployment rates or in states where people have flocked.
Cities such as Austin, TX, where over one hundred people move each day, have seen a major increase in the value of homes and the cost of mortgages. As their population continues to grow and housing becomes scarce, homebuyers can only expect mortgage costs to keep growing.
In other states such as California there has been a major decrease in affordability. Homebuyers looking to buy a home in California can expect to pay an average of 400,000 for a single family home. Buying a home at this price would require a huge down payment or an extremely larger mortgage.
More Rental Properties
When mortgage rates were low and houses were moderately priced, many people began investing in rental properties and becoming landlords. In the past, these houses would have probably been a quick flip, because being a landlord seemed like too much work for most people. However, recently, it has become the norm, especially in areas with rising property values. The increase of houses as rental properties has reduced the amount of reasonably priced homes perfect for first time buyers. This has left many young and/or first time homebuyers with fewer options to choose from.
Homebuyers who weren’t in a position to purchase a house several years ago could now face higher mortgage costs.