Want to buy a home but dread the 7% interest rate? Mortgage brokers explain 4 things you can do to make it happen.

  • Average 30-year mortgage rates hit 7% in October, the highest in 20 years.
  • This can make home ownership seem very elusive, and it can be frighteningly expensive.
  • Top mortgage broker Erica Davis has provided four tips for those looking to buy despite high interest rates.

of Average 30 year mortgage rate That hit 7%, the highest since 2002, according to Insider’s Mortgage Calculator.

The cost of installation may leave some homebuyers feeling a little defeated. Erica Davis, a mortgage broker for the firm, Guild Mortgage, told Insider.

A 20-year industry veteran, Davis ranks in the top 1% of approximately 340,000 loan officers in the country. According to the Scotsman Guideranks mortgage brokers based on criteria such as total dollar value of mortgages initiated and total number of loans completed. In 2021, when interest rates have fallen and buying a home has gotten a little easier, Davis has closed out her $69 million mortgage to refinance her 304 homebuyers or homeowners. rice field.

Davis giving mortgage advice to his 57,400 followers on Instagram @TheStylishLenderShe said her average loan amount was about $330,000, $30,000 more than Bankrate calculated. Average First Mortgage Balance in 2021.

She shared four pieces of advice for people looking to buy a home right now.

Davis recommends showing two years of income history if you work on commission and not in a W2 job, and keeping the same job until you pay off your mortgage. This is important when securing a home loan.

But Davis stressed that it is especially important in a high-interest-rate environment.

Take out a mortgage if your monthly payment is less than your rent payment

High interest rates scare people.

“People fear they won’t qualify or the risk is too great,” Davis said.

However, it is possible to secure a mortgage if you can find a home that allows for monthly payments including a mortgage. homeowner insurance And taxes are about what you can pay for in rent, Davis said.

The amount should also be affordable based on your income. The buyer’s monthly payments should not exceed his 30% of his income and the buyer should have his six months’ payments in savings. emergency fundsaid Insider’s personal finance team.

plan to refinance later

The main reason Davis advises mortgage borrowers to buy at higher interest rates is because they can refinance when interest rates drop.

If a homebuyer took out a $300,000 mortgage at 6.8% interest in November 2022, they would pay about $1,996 per month for a total of $718,560 over 30 years. To Insider’s Mortgage Payment CalculatorIf that homebuyer refinances a year later when interest rates drop to, say, 4.5%, he will be paying $1,520 a month from that point forward, for a total of $547,200 according to the calculator.

Refinancing will incur some additional charges, including a closing cost of 2% to 5% of the loan principal. In other words, a $300,000 loan could cost the borrower an additional $15,000 in closing costs.

Refinancing rates are usually slightly higher than regular mortgage rates, but in a few years they could be lower than they are today.

No one knows when and how much interest rates will go down. Economists at financial services firm Morningstar predict: Suppose the Fed starts cutting rates in mid-2023.

Negotiate with the seller to cover part of the closing costs

With more days on the market and lower asking prices, sellers may be more willing to negotiate than they were six months ago. In August, approximately 92% of recent buyers closed deals on favorable terms. According to Realtor.com.

Not only are the fees high, but the closing costs are also high. For a $300,000 mortgage, closing costs he could be between $6,000 and $15,000.

As such, Davis advises homebuyers to ask the seller to pay some or all of the sale costs during the sale negotiations.

Using less than half of your monthly credit card limit

your credit score It’s always important when applying for a mortgage, but even more important in a high interest rate environment.

Credit scores range from 300 to 850, divided into five ranges. A credit score of 620 or above, in the “normal” range, usually allows a buyer to secure a mortgage. According to Quicken Loans, mortgage providerThe higher the credit score, the more favorable the terms, According to CNBC.

One way to boost your credit score quickly and prevent it from dropping suddenly is to keep your credit card balance below half your credit limit, Davis said.

If your credit card bill exceeds 50% of your limit in a given month, your credit score will drop significantly.

So if you have a $10,000 credit limit, limit your monthly spending to $5,000 to avoid surprises when you try to close your mortgage.

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