April 22nd 2024.
Unfortunately, we have some bad news for all of you looking to purchase a new home. It seems that mortgage rates have surpassed the 7% mark for the first time in 2024. According to the housing finance company Freddie Mac, the average 30-year fixed-rate mortgage on April 18, 2024 was 7.10%, which is an increase from the previous week's rate of 6.88%. In fact, it's significantly higher than the rate of 6.39% this time last year.
Freddie Mac's Chief Economist, Sam Khater, shared in a news release that as rates continue to climb, potential home buyers are faced with a difficult decision. Do they take the leap and purchase a home now before rates increase even more, or do they hold off in hopes that rates will decrease later in the year? It's a tough call, and it's uncertain how many buyers will be able to handle the rising rates in the future.
The most recent increase in the 30-year mortgage, which is the most popular choice among home buyers nationwide, is the highest it has been since December 2023, according to data from Freddie Mac. As mortgage rates rise, so do the costs of borrowing, making it more challenging for buyers to afford their dream home.
With the current conditions, it's understandable that potential buyers may be questioning whether it's the right time to make a purchase or if they should wait and see if rates will go down. While experts can't give a definite answer, they suggest that the decision ultimately depends on each person's financial situation and whether it makes budgetary sense for them to buy now.
Economist and owner of Creative Investment Research, William Michael Cunningham, points out that even though the 30-year mortgage rate has increased, it is still much lower than it was in October 2023, when it reached 7.8%. To put it into perspective, he explains that a buyer taking out a $250,000 mortgage with a $10,000 down payment would pay $1,728 per month at a 7.8% rate, compared to $1,613 at a 7.1% rate. This difference would save the buyer over $41,300 in payment and interest costs throughout the life of the mortgage. That's four times more than the down payment itself, giving the buyer more financial flexibility if they decide to purchase another home in the future.
Cunningham also suggests that Black homebuyers should consider energy-efficient mortgages as a way to save on costs. With mortgage rates expected to continue rising, now is the time to explore different options to offset those costs. This report provides some helpful tips and strategies for saving money and managing the impact of rising mortgage rates.
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