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How the Newest Fed Rate Hike Could Affect Home Buyers

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The Feds raised the interest rates again today, July 26, by a quarter of a percentage point, the highest in 22 years. (source)

While mortgage rates are influenced by interest rate moves by the Feds, a number of other factors influence mortgage rates, including financial markets, inflation, Treasury yields and a homebuyer’s application-think credit score (source)

Still, the targeted interest rate range of 5.25%-5.50% could have a significant impact on home buyers who may experience higher prices on their loans. 

Feds Show a History of Raising Interest Rates

This is not the first time the Feds have raised interest rates which have now doubled since March of 2022 (source). Looking to the future, the Feds have hinted this may not be the last time they raise rates.

“The Fed left the door open to further rate hikes this year, with Chair Jerome Powell telling reporters in a news conference that additional tightening is possible unless inflation continues to cool rapidly” (source).

Advice to Home Buyers During Interest Rate Hikes

As Realtors and owners of real estate, it’s The Gamache Team’s responsibility to advise our clients on the best course of action to take when the Feds hike interest rates .

Every home buyer is different, and depending on your situation, there will be different solutions. 

However, here is our advice to home buyers during interest rate hikes:

  • Meet with a Realtor to discuss your goals, concerns, and financial status. 
  • Stay put. If the rates are out of your comfort zone, you may want to ride out the rise in rates with the understanding that what comes up, must come down! (or so we hope!) Use this time to work on your credit report and pay down debt so your debt-to-income ratio is more attractive and offers a better interest rate. 
  • Place a larger down payment on the home. Putting more money down will decrease the loan amount and the price you pay for your mortgage.
  • Buy now and plan to refinance when rates go down. If you find the home of your dreams, it may not be there if you wait for rates to go down. By waiting, you will also be competing with other buyers who waited and may lose out to someone else. As well, by waiting a year to buy the home, the home price may have risen, and you are paying more for the home.
  • Shop around for the best rate. Lenders offer different rates, terms, and assistance. Shop around for what works for you.
  • Buy down the rate. Ask your lender if this is a possibility. 
  • Stay positive and informed. The worst decisions are sometimes made in haste or when pressured and frantic. 

Contact The Gamache Team for More Information

The Gamache Team has ridden the wave of the real estate industry for decades. We haven’t seen a market yet that our clients haven’t made it through. Whether you are looking to move to a home in Dublin, Pleasanton, Livermore, or anywhere in between, we can help.

Let’s start with an initial consultation of ways we can support you during the rise in interest rates and put together a plan of action. 

Contact us to start the home buyer’s journey today.

The Latest Real Estate and Mortgage Industry News From The Gamache Team

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Photo credit to David McBee

2020 has been an incredible year for the real estate market. If you have been following our blogs, you already know that 2020 has been a record year for both the Real Estate and Mortgage Industry.

Real Estate Sales have been strong, with 2020 sales beating 2019 sales without having finished Q4. Sellers are choosing to move out of state or to more suburban areas closer to restaurants, shops, and recreation.

Homes with larger backyards for outdoor living, larger kitchens for immediate family gatherings, rooms for offices and classrooms, and space for working out top the list of what buyers are looking for.

Record low interest rates are allowing buyers to afford more home and in areas that were previously out of their budget.

Proposition 19, the measure on the November 3, 2020 ballot, was approved. The Proposition grants tax breaks for adults 55 or older, those who are disabled, and those who lost their homes due to a natural disaster but imposes limits on the transfer of real property to family members among other stipulations. (source).

While the details of the tax transfers that are set to begin on April 1 are still a bit unclear, experts predict Proposition 19 to be a driving force for many to move.

For more information on how Proposition 19 may affect your taxes, it’s best to seek advice from a certified tax expert in your area.

New Mortgage Limits Mean Good News for Homebuyers

The Federal Housing Finance Agency has announced an increase in the amount of conforming loans for 2021. Up from $510,400 in 2020, the new conforming loan amount for loans by Fannie Mae and Freddie Mac will be $548,250.  

The limit for high balance loans will be $822,375 and anything over that amount will be considered a jumbo loan.

The higher balance is especially beneficial for the Tri-Valley real estate market which typically features higher priced homes than other areas of the state and country.

If you are looking to purchase a home in the Tri-Valley area, The Gamache Team can help you find the perfect neighborhood.

Questions about the Latest Real Estate and Mortgage News? The Gamache Team is Happy to Help

The Gamache Team understands the complexities in the real estate market and loan industry. We know it can be confusing to keep up-to-date with what is going on and how this may affect you.

If you would like to learn more about how the newest changes in the real estate and loan industry may affect your home sale, home value, option to purchase, or more, please do not hesitate to reach out to us. Email Dan@gamacheteam.com or Call (925) 918-0332.

 

 

FICO Updates Its Scoring System-How This Could Affect Your Ability to Get a Loan

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Technology isn’t the only industry that regularly updates its systems; FICO (Fair Isaac Corp) does as well. This summer, FICO expects to roll out its newest versions of credit scoring, FICO Score 10 and FT.

The newest FICO scores don’t necessarily mean borrowers will have a more difficult time getting a loan, but the new scoring system create a larger gap between those with good credit and those with fair to poor credit.

FICO Score 10 will likely reward those who have good credit with a higher score. Those who have more difficulty paying off lenders and who currently have lower credit scores will likely see even lower credit scores.

Borrowers, Do Not Fret, There are Reasons to Remain Calm Despite the Release of FICO Score 10 and FT

Borrowers who are shopping for a loan in the near future have at least two advantages. First, there are numerous FICO releases. According to Ted Rossman, industry analyst at CreditCards.com and Bankrate, lenders tend to use a more forgiving version, FICO 8, released in 2009.

With underwriters preferring this version, it is unlikely that any lender is going to jump at the chance of using a new system, which may, or may not work to their advantage. Without testing how the new FICO version will impact the number of approved loans, institutions will most likely wait awhile before adjusting to the new system.

Ways to Achieve a High FICO Score

No matter what FICO version is being used, three principles remain consistent to earn a high FICO score.

  1. Pay bills on time every month
  2. Avoid applying for too much credit too often
  3. Keep balances low

It’s also a smart idea to check your credit report often. All too often, errors can occur that you may not be aware. The result is a lower credit score and higher finance rates when you do get a loan.

Sign Up for Experian Boost

Experian Boost was launched in 2019 in an effort to build credit history and improve credit scores. Consumers connect their bank records to provide a history of utility payments, telephone bills, and rent.

This free service has helped almost a million people improve their credit scores, according to Experian’s blog, Does Experian Boost Work? Borrowers whose lender uses a more recent FICO score see the most improvement.

Let The Gamache Team Help You Find a Lender

The Gamache Team can help you find a lender that works with you and your situation. We have come across almost every situation that might require a more detailed and creative approach to lending. Our relationships with our lenders provide a valuable asset to help our buyers get into the home of their dreams or prepare them to buy that dream home.

Contact us to learn more about how the lending process works and what you need to prepare to get a home loan.

 

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