Getting approved for a home loan is easier than it has been at any time in this past decade, accordingto the Mortgage Bankers Association. In fact, mortgages are almost twice as available as they were five years ago, and lenders have recently been approving 77% of loans, up from 71% in mid-2015. Better still, interest rates are still extremely low, historically speaking.
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Interest rates have been inching up, though, and seem likely to continue doing so over the coming years. PerMortgage News Daily, the national average rate for a 30-year loan was recently 4.19%, up from 3.62% a year earlier. Some experts are suggestingthat mortgage rates could exceed 6% by 2020.
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Location, location, location
The interest rate you get plays a big part in your satisfaction with your mortgage -- and these days there are great mortgage interest rates on offer in all 50 states. But there are other real estate factors to consider, too. Below, for example, are three states deemedworst for buying a home by the folks at gobankingrates.com.
Hawaii: What's wrong with Hawaii? Well, it's expensive. Accordingto Zillow data, the median price of homes recently listed for sale in Hawaii was $599,000. That's up by 6.4% over year-ago levels and it's expected to rise another 4.5% in the coming year. To buy a median-priced home, you'd probably want to make a 20% down payment of $120,000 and if you got a 30-year fixed-rate mortgage at 4%, you'd be paying$2,288 per month (about $27,500 per year). That's nosebleed territory for many Americans.
California: California suffers from a similar price problem. Its median price for listed homes was recently $463,800 -- enough to require a 20% down payment of close to $93,000 and to result in monthly mortgage paymentsnear $1,770. Of course, it's worth remembering that California is not only a very populous state but also a huge one, geographically. While some of its regions (such as San Francisco and San Jose) sport sky-high median home values, others (such as Sacramento) are much more affordable. Here are some median sale prices for the fourth quarter of 2016, per Bankrate.com -- along with how much each price has risen above year-earlier levels:
The rapid growth in home values can be a problem, too. It's nice to buy a home whose value surges, but rapidly rising prices can make it hard to buy a home and if the increases are part of a bubble, you can end up with an underwater mortgage in a few years.
New York: It won't come as any surprise that New York can also price many homebuyers out of the market. But it, too, offers a lot of variety in its median home values -- and perBankrate.com, none of its metropolitan areas topped $450,000. Its home values were growing at a slower rate, in general, than California's.
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Make informed choices
Fortunately, right now, and probably for the next year or two, interest rates will remain on the low side, historically speaking. It's smart to figure out just how much home you can afford -- and to buy less than that, in order to leave yourself a little margin of safety, in case you or a spouse loses a job or your household faces some major unexpected expenses. Also, once you decide that you're ready to make an offer as soon as you see a home you want, it's helpful to get pre-approved for a mortgage. That can make you a more competitive buyer.
So go ahead and take advantage of low interest rates for mortgages -- which currently exist in all 50 states -- but also consider other aspects of homes you consider, such as their location, their home values, and whether values are rising or falling. Make some smart moves now and you may be able to spend thousands of dollars less.
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