Sales of existing homes rising, but so are mortgage rates

[Dec 19, 2010.]

 

Although ABC News reports that existing home sales increased during November 2010, and that sales are higher than the lowest sales figures for existing U.S. homes in 2005, economists cite factors including rising Treasury bond yields and high unemployment as factors continuing to plague U.S. housing and the economy in general.

Mortgage rates are rising as well: HSH Associates reports that for the week ending Dec. 17, 2010, average combined rates for a 30-year fixed-rate mortgage (FRM) loan jumped by 23 basis points from the previous week to 5.18 percent. Although still low, when mortgage rates rise it affects home affordability and the ability of moderate income buyers to purchase homes.

Mortgage loans: affordable loans available, but for how long?

Bleak predictions about national housing markets are influencing forecasts for a slow housing recovery. The good news for buyers is that lower home prices can offset the impact of rising mortgage rates, but many consumers are taking a wait-and-see attitude toward buying homes due to concerns over the economy and unemployment.

Credit scores are an important aspect of finding an affordable home loan. Buyers with less than 720-740 FICO credit scores can expect to pay higher mortgage rates and may also pay points for "locking in" a favorable rate. Before shopping for homes, comparing several mortgage quotes can help you find your best mortgage loan.

Compare the annual percentage rate stated for each loan quote, as this amount contains not only interest, but also lender fees and closing costs. Given two mortgage loans at the same amount and with the same interest rate, any difference in APR results from estimated costs and fees.

Preparing for buying a home: shop mortgage loans first

The traditional scenario involves making an offer on a home you love, and then racing around town to find a mortgage loan. Getting pre-approved for a mortgage loan in advance of home shopping allows you to focus on an affordable range of homes, and to take a stronger negotiating position with the seller. Being pre-approved for a mortgage shows the seller that you're serious about buying, and may also limit surprises during the closing process. Making a list of mortgage questions before contacting potential mortgage lenders is helpful for finding a mortgage loan matching your needs.

 

About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.