January 27, 2020
Some borrowers are wondering if it is safe to buy a home in 2020. These people may be worried about interest rates taking a sharp move higher (they are currently very low due to issues we’ll discuss below) or about credit becoming harder to come by in the new year. But what is the reality?
It’s never been a better time to be interested in real estate, especially for those interested in buying condo units or having a house built for them from the ground up using a One-Time Close construction loan.
2019 was a very interesting year for interest rates; there were times when rates behaved differently than expected, times when they went lower in spite of other pressures that could have driven rates higher instead.
And it seems that 2020 has no shortage of surprises that lead some to believe the new year could be as advantageous (interest rate-wise) as 2019. In the new year, we have global issues affecting investor behavior that ultimately influence mortgage rates.
One thing does not directly affect the other, but when investors start running for safer investments you may notice changes in the interest rates for home loans.
One day’s mortgage loan interest rate adjustments had best-execution mortgage rates for FHA mortgages and VA loans dipping into the 3.375% range.
Coronavirus fears had investors nervous, and their investment behavior that day helped push mortgage rates lower. But investors aren’t the only factors at work when it’s time for the lender to decide what interest rate to offer you.
The interest rate you may be offered by the lender? They are affected by your own credit activities; your credit score helps the lender decide what interest rate to offer you.
That is why it is so important to work on raising your credit score a year or more ahead of application time; you need that time to establish on-time payment patterns and reduce your credit card balances. Doing this makes you better prepared for a loan.
If you have already been doing your credit prep and are approaching a year or more of having done so, you are much better prepared for your loan application.
Those who apply without doing so, without knowing what their own credit reports say and/or without a year’s worth of on-time, everytime bill paying risk disappointing results.
You CAN buy a home in 2020. It’s a matter of getting your personal finances ready, paying attention to your credit scores, and working on them as much as you can ahead of application time. Raising your credit score doesn’t just give you the ability to borrow and make a larger investment like a house purchase; it also improves your ability to get other credit in the future.
That’s an important thing to consider when trying to figure out how committed you should be to working on your FICO scores.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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