The coronavirus put a dent in the home-buying activity in early 2020. But as the summer — and the housing market — begins to heat up, should you be thinking about taking out a home loan?
It's OK to have concerns as the country and economy recover, but one big indicator of when to get a mortgage is flashing fortuitous signals for those who are itching to hunt for a home.
Most homebuyers need a mortgage to purchase a property. Paying outright in cash or savings isn't a possibility for most. However, when you borrow money to buy a home, you'll need to pay back the principal and interest.
That's why interest rates are so important to home-buying. A favorable interest rate will keep your borrowing costs low over time. Conversely, a high interest rate would lead to increased costs.
So when interest rate trends are low, it may indicate that now is a good time for homebuyers to get a mortgage.
While the interest rate you are quoted depends on several factors, average mortgage rates for common U.S. home loans are at historic lows, providing favorable home-buying conditions for many.
According to Freddie Mac, national average interest rates* at the end of July 2020 were:
While interest rates are important to your decision, many other factors apply. These include:
If you commit less than 20% to a down payment, you may have to pay private mortgage insurance, which increases your borrowing costs over time. Assess your savings and whether you can afford to make a down payment without breaking the bank this summer. Also, remember that you can use gifts toward a down payment.
Do some research on activity in the housing market you intend to buy in. Are prices trending up or down? Is housing supply tight or are there plenty of units on the market? How about the number of cash offers? If you time your decision right, you could benefit from a calmer market that has less competition from other homebuyers.
Everyone's personal situation will determine if now is the right time to get a mortgage.
If you are looking to buy a home this summer, you can start the process with The Federal Savings Bank. We have a wide array of home loan options and will work with you to find the best mortgage that meets your needs.
*These are nationally average rates and may not be available for all customers of The Federal Savings Bank. Terms and conditions apply. Subject to underwriting approval.