Indianapolis, as well as the rest of the state of Indiana, use the same Federal Reserve information as other areas of the United States. What is different, however, are the factors that determine the value of the home and the eligibility of the buyer. While the average number of jobs has increased and the amount of wages has also grown, mortgage rates have reached at historic lows, while Indianapolis and the rest of the country continue to recover from the recent slump in the economy. Unemployment rates, the amount of wages, and the types of homes being placed on the market have a direct impact on what interest rates will be. Newer, larger homes and whether or not the buyer has the ability to accumulate a down payment will also play a role in the type of mortgage chosen and the mortgage rate they are offered.
What Types of Mortgages Are Available?
There are two main types of mortgages when it comes to home loans. An ARM, or adjustable rate mortgage means that after a specific amount of time, the interest rate of the mortgage can change according to the Federal Reserve guidelines. For example, a 30 year adjustable rate mortgage with an interest rate of 4.00% for the first five years, will have that rate guaranteed for that length of time. At the end of the five years, however, the interest rate will convert to whatever is in place at the time. It can go lower or higher depending on what is being offered at that time. It can be raised to 7.00% or more, or lowered to 1.5% depending on the standing of the national economy.
A fixed rate mortgage offers a fixed interest to buyers for the duration of the mortgage, whether it be for 15, 20 or 30 years. This means that no matter what happens in the market or how good the economy becomes, the interest rate will be the same for the entire length of the mortgage. While most people opt for a fixed rate mortgage when they purchase a new home, some will choose the lower interest rate of an adjustable rate mortgage and then refinance before the rates begin to climb out of control. This can be difficult to do, however, and many people take the safe road with a fixed mortgage, even though the interest rate may be slightly higher.
What Are Popular Terms and Conditions?
Mortgage rates are often contingent on the terms and conditions of a loan. The amount of the down payment will impact how much money must be borrowed compared to the total value of the home. When a loan is written, the terms and conditions sometimes include any fees that must be paid, this includes closing costs, property taxes, insurance and any filing and title fees that may be required.
Loans are written for a specific number of years, the most popular being 10, 15, 20, and 30. The longer the loan, the less the monthly payment will be. Longer loans normally have lower interest rates. Because short term interests rates are paid off much sooner, the amount of interest is often higher, allowing banks and financial institutions to recover their money much quicker.
How Was the Market Leading Up to 2015?
The economic slump that hit the United States in 2009 left the real estate market in a devastating slump. Housing sales plummeted as unemployment rates sky rocketed. In Indianapolis the real estate market felt the same pinch as the rest of the nation. Over the last few years, however, economic development and urban renewal has helped to turn the housing market around. With unemployment throughout the Greater Indianapolis Area well below the national average, home sales have steadily increased, even in the hardest hit areas.
Was 2015 A Good Year To Buy?
2015 was a good year to buy a home in Indianapolis. Areas like Carmel, Fishers, Lawrence, Franklin, and Greenwood experienced dramatic growth through both commercial expansion and an increase in the number of jobs. New home construction also increased. With foreign economic markets staying somewhat neutral, mortgage based securities are reaping the benefits. As long as these types of conditions exist, the mortgage rates throughout the country will remain fairly low compared to the past few years.
What Is the Outlook for 2016?
Depending on who you ask, the outlook for buying a home in 2016 and receiving an affordable interest rate can go either way. Some experts say the global economy will continue to drive interest rates down, while others say that local economic growth could force the Federal Reserve to raise interest rates. The FHFA, or Federal Housing Finance Agency, could also play a role by implementing pricing adjustments that could alter interest rates by as much as 1.5 base points or 1.50%.
Another positive aspect that can be looked forward to when it comes to interest rates is the transition from regular to wireless transactions. Paperless transactions reduce the time it takes to close on a home loan and also reduces administrative fees and costs incurred by the lending institution. With over 1.26 million new households expected in 2016, it is anyone’s guess as to how high or low interest rates will go. Most believe, however, that they will remain between 3.00% and 4.00% throughout the rest of the year.
2 Point Highlight
With unemployment throughout the greater Indianapolis area well below the national average, home sales have steadily increased, even the hardest hit areas.
