Buying a home in cash often gives you great negotiating power, but who has that kind of money on hand? We know not many people do. When looking for your dream home in Virginia, you’re probably simultaneously shopping mortgage rates by seeking a lender that offers terms that work with your budget and your home-buying hopes. Understanding the current mortgage rate environment lets you make a smart home buying decision.
What are Virginia mortgage rates in early 2016?
Rates for 30-year fixed mortgage loans in Virginia dropped down to 3.52 in early February 2016, representing a decrease of almost a quarter a percentage point from the same time in 2015. The February rate is also over three-fourths a percentage point below the 2015 peak on 30-year fixed mortgage rates, which occurred in July 2015. While 30-year fixed mortgage loans tend to be most popular among buyers, lower rates can be had by shortening terms. A 10-year fixed mortgage in Virginia nets a person with fair credit an interest rate around 2.72 percent, for example.
National mortgage rates are lower than expected going into 2016’s home-buying season. Experts predicted that rates would begin climbing again after the traditional winter drop off, especially as the Federal Reserve raised benchmark rates in December 2015, but that didn’t happen.
What programs offer special mortgage rates?
Some home buyers might qualify for federally backed programs that help secure a lower interest rate or more favorable terms, even when credit or down payment situations are not as optimal as you might hope. First-time home buyers might be able to take advantage of FHA loans, which historically run a fraction of a percent below conventional rates. As of February 2016, both FHA and conventional rates are bottoming out at the 3.5 percent mark, but as rates increase through the summer months, FHA loans could offer the better deal for qualifying buyers.
Individuals with military service backgrounds, whether veteran or active duty, might also qualify for the VA Loan Guaranty Program. Mortgage software vendor Ellie Mae reports that VA loans can come at three-eighths a percent lower than conventional mortgages, though the difference between the rates can vary. Even at a quarter a percent lower – which is common – the VA rates save a great deal on the overall cost of homeownership.
What impacts your personal mortgage rate?
Published rates don’t always reflect the rate an individual homeowner ends up with after the paperwork is done. Your personal Virginia mortgage rate could depend on a number of factors, including your credit score. According to the Consumer Financial Protection Bureau, the majority of mortgage lenders will review your credit score and reports from all three major reporting bureaus. Lenders use the information in those reports to decide whether to offer you a loan to begin with and what interest rate should be tied to the loan offer. Lenders are likely to consider your credit score, the amount of debt you have in relation to your income, the amount of debt you have in relation to open credit, and your history of paying on time with other lenders.
Other factors that can impact interest rates when you buy a home in Virginia include the location of the home, the price of the home, how much you intend to borrow, and the terms and type of loan. We already noted that interest rates are different for varying terms and for loans that are backed by different entities. Whether you opt for a fixed or variable interest loan also impacts your personal loan rate. Adjustable-rate loans typically start out lower than the current fixed rate, but you run the risk that the rate could increase later, rising well above future fixed rates.
How are Virginia mortgage rates likely to change in 2016?
Historically, mortgage rates creep up throughout any given year, with the peak usually hitting between July and late September. Trends for mortgage rates tend to mimic trends for home-buying throughout a year, and most buying and selling occurs from spring to fall each year. You can expect to see mortgage rates in Virginia increasing from the February through sometime in September, when they will begin dropping again. The fact that 2016 is starting with such low rates could mean that rates throughout the year are lower than those for the same time periods in 2015.
National and international economic factors could create some outliers for mortgage trends in 2016. Some non-U.S. economies are struggling, which usually means a downtrend in mortgage rates due to an investing phenomena called flight-to-quality. U.S. mortgage bonds are considered a safe investment, and during questionable economic times, investors move assets to safer baskets. Strong investing in bonds bolsters the dollar and typically causes an overall reduction in mortgage rates.
Should you buy a Virginia home now?
With mortgage rates below 4 percent, home buyers with fair credit have a lot of buying power. If you’re considering a move in 2016, acting earlier rather than later is likely to result in substantial savings over the life of your mortgage loan. Acting while rates are low also increases the amount of home you are able to buy. Mortgage lenders usually limit the amount they are willing to lend based in part on your income, using that figure to determine how much you can afford to pay each month. Since a lower interest rate means lower monthly payments, you might be able to buy a more expensive home with the same budget.
Whether now is the right time to buy a home is a personal decision that only you can make. The low rates might be a big factor in your decision, but you’ll also need to consider personal finances, the need for a home, and other individual circumstances.
2 Point Highlight
Rates for 30-year fixed mortgage loans in Virginia dropped down to 3.52 in early February 2016, representing a decrease of almost a quarter a percentage point from the same time in 2015.
With mortgage rates below 4 percent, home buyers with fair credit have a lot of buying power.
