Yes, it’s true. Interest rates are going up. But, even though the rates are rising, there is still good news in the housing and the mortgage marketplace. How so you say?
I’ll talk about that soon, but first let’s get back to the mortgage rates. Seven months ago, the typical interest rate was 3.41%. Today’s rate is almost 4%. And the rates will be going higher, as the Federal Reserve has already stated that they will be raising interest rates again.
Now here’s the good news.
Since the interest rates have risen the mortgage requirements have become a little easier. There are two things I come into play in this statement.
First let’s talk about the FICO score. Also called your credit score, this is a prime factor in a buyer’s ability to get a mortgage. Now, in September a minimum credit score of 731 was required. However, since September, that number has decreased. As of February a credit score of 720 minimum is necessary to secure a mortgage. This opens the marketplace for a large number of buyers who were not in the market six months ago.
The other part of the good news is that the amount of the down payment has fallen. More and more buyers or making lower down payments these days. It’s becoming common for buyers to put down less than 5%. This means they have to save less, and are able to enter the real estate market earlier than before. Here’s an example.
In 2011 only 2% of buyers had a down payment less than 5%. Since then the number has steadily risen, and so far in 2017, 17% of home purchasers were able to purchase with a down payment less than 5%.
So in summary, yes the interest rates are rising. Buyers will have to deal with a slightly higher monthly mortgage payment, but they will have an easier time qualifying for the mortgage they will need to purchase their first or their next home.