As winter draws to a close, homeowners coming out of hibernation are looking for new homes. And those who sleep too late can expect to pay top dollar for the house they want.
Buyers are anticipated to outnumber sellers this spring, creating a shortfall in inventory that is driving up asking prices. Given that prices are rising, more people will be pushed on the borderline of conventional mortgage limits and may need a large down payment or a jumbo mortgage.
The nationwide median price for an existing single-family home was $213,800 in January, up 8.2% from this time a year ago. Price appreciation was at the highest rate since April 2015 a part of a 47-month upward trend of gains.
Lenders are also predicting a busy borrowing season. With loan volumes for home purchases at its highest level in four months, and low interest rates fueling a mini-refinance boom, buyers seeking the best mortgage deals should ask lenders how long closings are taking. Borrowers got a sweet surprise when mortgage rates fell earlier this month – despite the Federal Reserve’s short-term rates increase in December. The average interest rate for a 30-year, fixed-rate jumbo mortgage was 3.75% for the week ending March 4, according to the mortgage rate website HSH.com. Rates aren’t expected to rise above 4% before May. With a softened economy, the Fed isn’t predicted to raise short-term rates at its March meeting, with the next opportunity being June.
To avoid traffic jams that could delay closings, get into the market sooner. Another piece of advice is for borrowers to skip prequalification, which is based on stated income and assets, and go to the full step of preapproval, which requires submitting full documentation to an underwriter. Preapproval can save as much as seven to 10 days in the closing period.
One silver lining of rising home prices is greater lender confidence in jumbo mortgages, leading to loose credit qualification. Borrowers typically need a credit score of 740 or more to secure the best interest rates, but now most lenders will accept a 700 score, and some will take a 680 or occasionally even lower. While a 20% down payment remains the industry standards for jumbos, more lenders are also offering lower down payment jumbos (15% or even 10% down).
