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Up-front mortgage costs could soon fall

July 7, 2017

One of the big issues in recent months - especially for first-time buyers - has been the affordability of buying a home. Many have been concerned about rising rates {on mortgages} and significantly higher prices. But experts actually say many such transactions may be more affordable than many shoppers expect.

"7 in 10 noncash buyers make down payments of less than 20%."

Perhaps the largest single aspect of home affordability in the eyes of many buyers is the amount of money they have to put together to make a down payment, according to The Los Angeles Times. During and even after the recent recession, when lenders were being extremely cautious, it was often required to make a down payment of 20 percent - or more - to qualify for a home loan. But as the economy improves, that's just not the case any more; more than 7 in 10 noncash buyers over the past five years have been able to make down payments of less than that number.

"It's been my experience that about half of my clients know that there are loans and/or programs that require less than 20 percent down," Kris Lindahl, a real estate agent in Blaine, Minnesota, told the newspaper. "The other half still think that they must have at least 20 percent down in order to qualify for a home mortgage."

What about rates?
Meanwhile, mortgage rates have also been a bit of a sticky wicket for many buyers, who watched with some alarm as these costs rose well above recent averages in the immediate wake of the recent election, according to The Wall Street Journal. But there are two things to keep in mind here: First - and most important - is that even as rates rose, they remained historically affordable. Even prior to the economic downturn, average mortgage rates tended to hover in the mid-5 percent range, or higher.

But earlier this year, rates only crested 4.5 percent briefly, and began to slide once again shortly thereafter, the report said. Now, they once again stand at less than 4 percent, and experts believe that this trend is going to continue for some time to come. These rates do, however, remain well above year-ago levels, but that was when they were at some of the lowest points ever observed in the housing market.

"Rates remain well above year-ago levels."

Consumers aren't responding?
Despite these positives, it seems that consumers remain concerned with various issues in the market, according to the most recent Weekly Mortgage Applications Survey from the Mortgage Bankers Association. In the week ending June 23, the total number of applications filed slipped 6.2 percent, fueled by declines for both purchases (down 4 percent) and refinances (down 9 percent). This came at a time when rates were flat, but still highlights that consumers remain wary of affordability conditions in today's market.

However, with home prices only expected to keep rising for some time to come, the earlier shoppers can get into the market, the more likely they will be to find a high-quality deal that could help them save thousands.




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