Williamsport Mortgage FAQ For 2022

A mortgage is a loan provided by a mortgage lender or a bank that enables an individual to purchase a home or property. A home mortgage plays a crucial role in helping individuals acquire a home in a timely fashion. We discussed with D. Shane Whitteker some frequently asked questions about mortgages. Shane is the owner and chief broker at Williamsport mortgage broker Principle Home Mortgage.  

Are mortgage rates going to rise in 2022? How high do you think the rates will go? 

Yes, mortgage rates are likely to rise this year. Experts have cited the rising inflation rate as a significant factor in increasing mortgage rates experienced from the beginning of this year. Consumer price index statistics released by the US Bureau of Labor Statistics shows that there was 7% inflation in 2021. This is the most significant inflation surge in 40 years. Mortgage Bankers association's economists argue that mortgage interest rates may hit more than 3.9% before the end of this year. Going by the current economic growth trend and the increase in interest rates lately, there is a possibility that these predictions may be realized before the end of 2022. 

“I do think rates will increase in 2022,” Whitteker says. “I don’t think the increase will be drastic but this depends on the economy and inflation. If we continue to see record levels of inflation, we will likely see the fed be more aggressive with rate increases. Or at least that is how it should go.”  

What will the effect on the housing market be? Are there any positives to higher interest rates? 

If mortgage rates rise as has been predicted, the buzz in the housing market could slow down. When home loan rates are high, people tend to shy away from acquiring mortgages, making a rush for houses cool down. The net effect of this is a broader selection of houses in the market. 

What are some lower interest rate home mortgage options? 

Different mortgage options can be tailor-made to fit each buyer's unique needs in today's market, from borrowers with perfect credit scores down to those with lower income and small down payments. Getting a mortgage with a low interest rate is beneficial because you get to save some money. The higher the house price, the more significant the amount you save by going for lower interest rates.  

According to Whitteker, the lowest interest rate generally come from government-backed mortgage programs. Some are only available in special circumstances. 

“Conventional mortgages, USDA loans, VA mortgages, and FHA loans all come with relatively low rates right now. The lowest payments are usually associated with VA and USDA,” Whitteker says. “USDA, VA, and FHA are considered government loans, which typically have lower interest rates than conventional mortgages.” 

Don’t forget about mortgage insurance – an important consideration for your monthly budget. 

“With USDA the mortgage insurance paid monthly is lower than FHA and sometimes lower than conventional,” Whitteker says. “This of course impacts the overall payment. VA comes with no monthly mortgage insurance and has the added benefit of the typically lower government rates.” 

When is the best time to buy a new home? Do higher interests mean it's a good time? 

While interest rates on home mortgages may rise in 2022, don’t discount the idea of buying a new home. If you can afford the home, it's never a bad time to buy, for the following reasons: 

• With home prices still rising, it's not advisable to wait if you can afford to buy. Projections from experts suggest that the rates could be higher by the end of the year than they are today.
   
• A home is generally an appreciating asset. The sooner you become a home owner, the better your long-term financial picture can become.
   
• Mortgage rates are rising but may still be less than the historical average.
   

Who sets mortgage interest rates? 

The market forces set mortgage interest rates beyond the lenders' control. Investors who buy securities from mortgage lenders because they want stable payments for a long time collectively determine the interest rate of your mortgage loan. Your lender offers you an interest rate that investors on the secondary market are willing to buy. 

Why are interest rates going to rise this year? 

Inflation is projected to rise this year. The rise in inflation rates will have an impact on interest rates. In simpler terms, the higher the inflation, the higher the interest rates. This occurs because as inflation rises, the federal reserve will typically reduce the money supply which causes rates to increase. This is done to cool the economy down and get inflation back to a reasonable level.  “Inflation is creating a scenario where if we don’t rase rates to deal with escalating inflation we may see pretty bad future impact on the economy,” Whitteker says.  

What are some of the ways a prospective buyer can get a lower interest rate on their mortgage? 

First, if you are a prospective buyer, improve your credit score to get lower rates. The buyer should also choose his mortgage type carefully. If they can afford it, they should make a larger down payment. This lowers the principal sum. Lastly, prospective shoppers are advised to consult their local mortgage broker about their home buying situation. Your local mortgage broker is an indispensable wealth of home buying knowledge – seek them out and ask them every question you have about the process. 

What's your advice to prospective home buyers? What about prospective home sellers? 

If you can afford to buy your home today, go for it. There will never be a better time to buy than now. Home value will likely continue to go up this year.  

“For homebuyers, save your money, manage your debts especially revolving debt and move sooner than later when you are able to. Waiting another 5 years to buy a home because you want to prepare more will likely put you farther behind. To sellers, the market is in your favor right now. Don’t be afraid to list your home but be prepared for your home to sell very quickly.  Make sure you are ready to move into another home in 45 days from the listing date.” 

To learn more about home mortgages, contact the experts at Williamsport’s mortgage broker, Principle Home Mortgage at (570) 980-9359.