It's a¬†great time to buy a home.
Home prices have climbed more than 5%¬†annually for the second straight year, but today's mortgage rates are dropping, helping to keep homes affordable for buyers.
But what will happen¬†through the end of 2016¬†and into the start of 2017? Likely, a drop in home affordability.
Home prices are expected to keep climbing, and mortgage rates aren't expected to stay in the 3s for long.
So, what should you do if you're on the fence about buying?
Should you wait out the market for another 12 months, and hope you're in a better position to buy next year? Or, do you¬†buy a home now, even though you may not be completely ready to do so?
There's no¬†"right answer", but one things's nearly certain --¬†the best deals you find in housing may be the ones you find today.¬†By this time next year,¬†buying a home could be an expensive proposition.Click to see today's rates (Sep 29th, 2016)
Each quarter, the National Association of Homebuilders (NAHB) attempts to measure whether U.S. homes are "affordable" for the typical U.S. household.
The group measures median household incomes within 225 metropolitan areas nationwide and -- using average 30-year fixed rate mortgage rates -- determines whether these incomes can support the typical monthly housing cost.
The index is¬†known as the Home Opportunity Index (HOI).
In this¬†year's first quarter, the Home Opportunity Index hit 65.0%, which means that 65 percent of all homes are affordable to households earning a median income. However, affordability rose only because mortgage rates have remained so low --¬†and buyers are glad that they did.
Since the start of 2014, 30-year mortgage rates are down more than 80 basis points (0.80%), which has lowers a homeowner's monthly mortgage payment $212¬†on a loan at the national mortgage loan limit of $417,000.
Falling rates and payments helps a borrower's¬†debt ratio requirements;¬†and,¬†can mean the difference¬†being mortgage-qualified to purchase a home, and not.
When¬†mortgage rates climb, though, affordability will be¬†threatened.¬†Analysts expect rates to end the year higher than where they are today.
Home prices are expected to rise, too.Click to see today's rates (Sep 29th, 2016)
Home prices are up close to six percent from last year. This affects a buyer's potential monthly payment; and raises¬†the down payment required to purchase a home.
It can be tough enough to¬†scrape together a down payment -- especially for buyers putting 20% down on a home. But, not everyone want to so that.
Thankfully,¬†low- and no-downpayment loans¬†remain readily available.
Home buyers can choose from among the¬†Conventional 97 and the HomeReady‚ĄĘ home loan, each of which¬†requires three percent down; the FHA loan, which requires 3.5% down; and the VA and USDA loans, which require zero money down.
The Conventional 97 mortgage is mostly used by buyers with better-than-average credit who are purchasing single-family homes to "live in"; and the¬†3% down¬†HomeReady‚ĄĘ home loan is geared at buyers in lower-income census tracts.
Both programs, however, are limited to $417,000,¬†so buyers in "high-cost cities" should consider either putting five percent down, or a different low-downpayment option.
One such option is the FHA loan, which allows for a downpayment of just 3.5% and allows buyers to finance¬†any¬†home which will be their primary residence, so long as the home is a single-unit (e.g.; a house, a town home, a condo) or a home of up to 4 units.
FHA loan limits are higher than what's allowed by the¬†Conventional 97 and¬†HomeReady‚ĄĘ, ranging up to $625,000.
Another option for buyers making a small downpayment is no-money-down VA loan. Available to buyers with military experience, the¬†VA Home Loan Guaranty program¬†never charges mortgage insurance and mortgage rates are typically the lowest of all loans available.
Lastly, note that¬†there's another no-money-down loan -- the¬†USDA loan -- ¬†available to buyers, but the program cannot be used in a "big city" markets. It's use is relegated to¬†buyers in the exurbs and in less densely-populated suburban neighborhoods.
Ask for these loans with any U.S. lender.Click to see today's rates (Sep 29th, 2016)
For buyers in search of affordable homes, differentiation must be made for "big markets" and "small markets".
Small markets are often more affordable than big markets; and homes¬†along East Coast and West Coast are¬†often least affordable.
It should be no surprise, then, that many of the¬†Most Affordable U.S. Housing Markets are in the Midwest, spread throughout Ohio, Michigan, Iowa and Indiana.
Last quarter, the country's most affordable small-ranked city was Cumberland, Maryland.
98.0 percent of homes in the western Maryland area¬†were¬†affordable to families earning the area's median income of $55,100.
The Wheeling, West Virginia¬†area ranked second with an affordability index of 96.4.
Meanwhile, in the Big Market category, Syracuse, Ohio took top honors with 92.3¬†percent of all homes affordable to families earning the area's median income of $69,200.
Syracuse was followed closely by other larger cities including¬†Springfield, Illinois; Indianapolis, Indiana; and Roanoke,¬†Virginia.
Overall, the Midwest ranked highly for home affordability.
On the opposite end of the affordability scale sits San Francisco, southern California, and New York City.
Prior to 2013, the New York metro region ranked last in home affordability for 18 straight quarters until losing its title of Least Affordable Market to San Francisco - San Mateo - Redwood City, California, which has now repeated as the Least Affordable City in America for 12 of the last 13 quarters.
In San Francisco, where the median home sale price is $1,060,000 and the median household income tops $96,800, just 10.4 percent of homes were "affordable" to local home buyers.
Los Angeles - Long Beach - Glendale, California ranked second-worst for affordability at 15.6 percent.
Affordability in the New York metro area, which includes White Plains, New York and Wayne, New Jersey, was 36.0 -- good for fifteenth-worst nationwide.
The 12 least affordable¬†cities were all in California.
Home prices are rising and so are national rents. You may not be ready to buy a home today but, by next year, the the affordability of homes is expected to be worse.
Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Click to see today's rates (Sep 29th, 2016)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2016 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)