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January
17
17
Tips for Financing a Home Purchase in 2022
Out with the old, and in with the new. It's a new year, and as you begin perusing listings for Bemidji homes for sale, it's essential first to understand lending requirements and changes within the mortgage industry. Whether you're planning to buy in the spring or wait until later in the year, the following are some key things we advise all homebuyers to consider as they contemplate prospective real estate purchases.
- Credit Still Counts
Your credit score is crucial to securing the best interest rate and the most favorable terms and conditions. Therefore, making sure your credit report is accurate and that you pay down debt on time, every time, is imperative.
- Prepare for Higher Down Payments
While 20 percent is the industry standard, higher prices and sales often at above-appraised value might demand a larger down payment. Fortunately, some programs can help you ease this burden, such as the Freddie Mac Home Possible program, which can get you into a home for as little as 3% down. - Lenders Are Leery of Sky-High Prices
Lenders will not lend for more than the appraised value. However, as inventory remains low, prices are rising, and many buyers are putting in cash offers well above the appraised value. If the home is being sold for more than the lender is willing to finance, it is likely that you will need to put up the cash to make up the difference between the price the buyer wants and the value the lender will finance. - FHFA Has Increased Borrowing Limits
The Federal Housing Finance Agency has raised conforming loan limits. This means that homebuyers can qualify for significantly higher loans in some areas. For 2022, the limit for conforming loans backed by either Fannie Mae or Freddie Mac is $647,200 for single-family homes. This is an increase of just under $99,000 from 2021 limits. Further, the limit is raised to nearly $1 million for higher-cost areas, meaning it will still be possible to secure loans equal to the home's value within these markets. - Interest Rates Will Rise
It's a safe bet that interest rates will rise in the coming year as the Fed seeks to reign in inflation. How high they will go is a hot topic of debate, but most industry analysts expect rates to rise to somewhere between 3.4% and 4.1% by the end of 2022. Currently, they're hovering around 3.1%, which is higher than their lowest point of 2.65% this year. Thus, if you are planning to buy, sooner is a better bet than later because there is almost no scenario where interest rates will be lower than at present. - 2022 Will Remain a Seller's Market
Supply chains remain kinked, labor is difficult to secure, and existing home inventory is low. This means that 2022 will most certainly remain a seller's market because these problems will not be resolved by the end of the year. While prices will rise, they are expected to level off as the year progresses; current estimates peg these increases around 5.7% for the year. This includes prices for existing homes and homes under construction. For buyers, buying Brainerd homes for sale early is a better bet than attempting to time the market to find a deal later on.
Call today to speak with our real estate team to learn more about the steps we take to help our clients find the ideal home for their needs, budget, and desired lifestyle.