If you’ve been considering buying a home, 2015 might be the year to do it. Time Warner Cable News’ Tara Lynn Wagner filed this report.
Experts predict this will be the year the Fed starts to raise interest rates. If it does, mortgage rates will rise as well, which is why Teresa Bryce Bazemore of Radian Guaranty says this should also be the year you become a homeowner.
"You want to do it now because you can get the best interest rates. Even if they go up later in the year, I think they'll only go up slowly so you'll only lose a little bit of that benefit," she says.
Low mortgage rates are only one a part of a very complex puzzle that involves a lot of numbers. One is your down payment. 20 percent is the gold standard, but depending on where you live, we can be talking an insurmountable chunk of change. That is where Radian Guaranty comes in, offering private mortgage insurance to close the gap.
"The purpose of the private mortgage insurance is really to allow people who have less than 20 percent down to be able to buy. So whether you want to put 10 percent down or 5 percent down or 3 percent down, it allows you to do that," says Bryce Bazemore.
The insurance, which comes at an additional cost, protects the lender in case you default on the loan, and in most cases, you will not have to pay it forever. Lenders are required by law to automatically cancel the premium once your loan drops to 78 percent of your home's value.
The other important number you need to know is your credit score. And not just know it – understand it.
"Why is it that my credit score isn't higher? What can I do to help make that credit score higher?" says Bryce Bazemore.
If you are on the lower end, she suggests taking some time to clean it up and build up your nest egg while you're at it. She also recommends getting prequalified for a mortgage, and then comparing what you can borrow versus what you can afford to pay back. And that, it turns out, is probably the most important number of all.
"I think we saw that in the crisis, when a lot of people were using various products - adjustable rate products, balloon products - that allowed them to get a lower interest rate up front to qualify for more house. But it wasn't sustainable and what we want to see is people getting into houses that are sustainable for them for the long term," says Bryce Bazemore.