Is This Year The Right Time For You To Make That Home Purchase? California Platinum Loans Explains How Mortgage Rates Can Guide You Make That Decision Today

Did you know that most mortgage loan professionals have their calculators at hand all of the time? You don’t have to do that, but if you’ve been thinking about buying a house in the next three to twelve months, how can you choose which is the right time? Many people look at home purchase prices to guide their decisions. With prices steadily increasing, you might find that the longer you wait to buy, the fewer homes you’ll find available in your price range. But what about interest rates? Should they influence your decision to buy a home in the year to come?

Yes — mortgage interest rates can make a big difference in home buying

Would you believe that in 1981, home loan interest rates averaged over 18%? Between 1980 and 1982, the lowest average 30-year fixed-rate mortgage was 16.35%. If you bought a $300,000 house in 1981 with a 20% down payment and a 30-year mortgage at an interest rate of 18%, your monthly principal and interest would be $3,617. At a 5% interest rate, your principal and interest would be $1,288. So, yes, mortgage interest rates can make a big difference.

Fortunately for homebuyers, interest rates have been much lower than 18% in the past ten years. The average interest rate in 2018 was 4.54%. In 2019, this average dropped under 4%. Bankrate reported that 90% of mortgages as of 2018 had interest rates between 3.5% and 6%. 

Fannie Mae and Freddie Mac, the two largest government-affiliated mortgage corporations, are predicting that 30-year fixed-rate mortgages will average between 3.6% and 3.7% throughout 2020. The Mortgage Bankers Association predicts that interest rates will be about 3.9% throughout 2020. Other organizations, including the National Association of Realtors, are predicting 3.6% average interest rates for a 30-year fixed-rate mortgage.

Will these low rates last forever?

It’s unlikely that the current low mortgage interest rates will stay the same indefinitely. If you have a higher interest rate home loan, you may be able to refinance for a lower interest rate and lower monthly payments. If you’re interested in buying a house over the next year, you should be aware that rates began to decrease in November 2018, but trends like this don’t last forever. Right now, mortgage interest rates can make many homes affordable and can help you to lock in a 30-year or 15-year fixed-rate home loan for the home you want to buy.


Learn What Mortgage Lenders Mean When They Say You’ve Been Pre-Approved Today for a Loan, Call Back Now, Don’t Delay

Is being pre-approved for a home loan the same as those credit card pre-approved offers you get in the mail? Or is it the same as actually being approved for the mortgage you need to buy the home you want?

Neither, it turns out. Mortgage pre-approval means exactly what it says: a lender is notifying you that you have preliminary approval for a specific loan amount. They’re also giving you an indication, not a guarantee, of the interest rate you could be eligible for if you continue through the loan underwriting process. A mortgage loan pre-approval means that the lender considers you qualified to borrow a certain amount of money based on the information they have at the time of your pre-approval.

You also shouldn’t confuse a California home mortgage pre-approval that you get from a specific lender based on soft credit inquiries and your stated income with letters you might get in the mail promising pre-approval or a certain loan amount. Those letters are sales tools, not real pre-approval letters.

What are the advantages of being pre-approved for a home loan?

If you’re looking for a home to buy, you can get a firm idea of the amount of mortgage you can afford based on a loan pre-approval. If you have a pre-approval letter, you know that you can narrow down the price range of homes you can afford. You won’t be shopping below your marketability to buy, and you also won’t waste time looking at properties that are out of your price range.

You can also increase your ability to make a successful offer on a house. Few things are more frustrating than finding the right house at the right price, but losing out on the opportunity because you aren’t pre-approved for a home loan. Loan pre-approval is a good step to take when shopping for a home, but there are a few drawbacks. You may be tempted to complete the home loan process with the lender who pre-approved you and not considers working with any other lender. This is one of the primary reasons it’s a great idea to work with an experienced home mortgage professional who can offer you pre-approval opportunities and give you the ability to evaluate and choose which lender and California home loan are right for you.


Are You Now Seriously Thinking of Purchasing a Home That You’re Already About To Complete That 20% Down Payment Very Soon?

If you’re serious about buying a home, you’ve probably already looked at different home mortgage loans and may have an idea of the size of down payment you will need. Although nearly every online mortgage calculator starts out with a 20% down payment, it’s not essential for you to save this much money. You may be able to qualify for a down payment assistance program that can cover all or part of the down payment. FHA loans can require you to pay as little as 3.5% down, while if you’re a qualified veteran, you can buy a house with no money down through the VA home mortgage program.

Let’s look at a more general situation, however. If you want to buy a $500,000 house, do you really need to put $100,000 down, and pay for all your moving costs? Probably not — but let’s say you do — how long should it take for you to save $100,000?

As to saving for a down payment on a house, you shouldn’t mix your down payment savings in with your emergency funds. Some financial advisers counsel that you should have at least six months in emergency funds, in case you fall ill, lose your job, or have another unexpected financial setback.

Once you’ve selected a goal for your down payment savings, let’s say $100,000, you’ll need to establish a plan. What could you use to start the account? A lot of people have plans for their tax refund. So, let’s say you’ll get a $5,000 tax refund this year. Only $95,000 to go, right?

Get the best interest rate you can find

The average bank or credit union savings account paid only .8% interest in 2019, according to Bankrate. You’ll want to find another savings alternative. Look for a savings or investment product that will pay at least 2% interest. Some programs require you to have a minimum deposit, but if you’ve got $5,000 to start the account, this should qualify you for most interest-earning savings accounts.

If you start your down payment savings plan with $5,000 from your tax refund and put $1,500 a month in your savings account, after 60 months (5 years), you’ll have contributed a total of $90,000 to the account and earned over $5,048 in interest for a total of $100,048.

If this sounds “un-doable,” ask yourself if there is any way you can free up $1,000 to $1,500 a month for savings. This is how people build financial security and move beyond living “paycheck to paycheck.”

Obviously, if you can find savings or investment plans that will pay more than 2% interest, or you can afford to save more than $1,500 a month, you’ll have your down payment in less than five years. You may want to investigate robo-advisers or alternative savings plans. Just keep in mind that if your savings are in uninsured brokerage accounts, you can lose money. Balance safety with potential earnings for your best plan to save money for a down payment.