A Look Into The Markets: February 2024
"Imperfection is beauty, madness is genius, and it's better to be absolutely ridiculous than absolutely boring." - Marilyn Monroe
Whether you're buying your first home or your fourth, creating a budget is essential to ensure you can reasonably afford the house you want. In this issue, we'll discuss some tips for setting a homebuying budget, as well as the following:
What to Watch - Where are mortgage rates headed as the 2024 Spring Buying Season approaches?
How To Set Your Homebuying Budget - Take a look at your finances to establish a budget for your home purchase.
How Curtains Can Revamp Your Home - Curtains are an easy way to transform a space and update your home.
Q&A: What's the Ideal Credit Score for a Mortgage? - The credit score you need to get approved for a home loan depends on the mortgage type.
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What to Watch
Rates and the Spring Buying Season
Rates: Although rates have come down from the 8% highs we saw in 2023, the current direction remains uncertain in the near term. There are a few factors contributing to this trend. These include worries about the national debt, an unexpectedly robust economy, the possibility of inflation picking up again, and diminishing odds of a rate cut from the Federal Reserve in March. Looking ahead, the focus will be on upcoming economic indicators such as GDP and the Core PCE (the Fed's preferred measure of inflation) and the potential impact of a large volume of Treasury supply.
Spring Buying Season: Generally refers to a period in the real estate market when there is an increased level of home-buying activity during the spring months. This trend is often observed nationwide, and several factors contribute to the occurrence. As March sets in, the weather should begin to shed winter's harsh conditions and temperatures become milder while the days grow longer. Spring also brings green lawns and blooming flowers which add to curb appeal. Homeowners with families that may be looking to move usually make plans to purchase in the spring and make the move in the summer due to school and activities. In addition, Uncle Sam may help with a spring purchase if you are due a tax refund. And because spring embodies renewal and a fresh start, it could push people to consider some transformative changes, like purchasing a new home. As the season approaches new listings tend to increase, which the market desperately needs in the current environment.
Housing News
How To Set Your Homebuying Budget
Consider the 28% rule. The 28% rule states you shouldn't spend more than 28% of your gross monthly income on a mortgage and other housing expenses, such as homeowners insurance. It's a good starting point if you're unsure how to budget for a home purchase. However, make sure you take your other monthly expenses into account. For example, if you have student loan payments or other debts, you may choose to spend less of your income on housing.
Save for a down payment. Factor your down payment into your homebuying budget. The more you can put down on a home, the less you'll need to finance. In addition, you can avoid private mortgage insurance by making a 20% down payment. You may be eligible for a second mortgage to help close the down payment gap and avoid mortgage insurance. Or you may choose to save for a larger down payment.
Account for closing costs. In addition to a down payment, make sure you account for closing costs. These costs usually include the application, appraisal, and origination fees. Typically, you can expect to pay closing costs ranging from 2% to 5% of the sale price.
Sources: Businessinsider.com, Myhome.freddiemac.com, Investopedia.com
Home Improvement
How Curtains Can Revamp Your Home
Incorporate color. While neutrals have their place, a bright pop of color can instantly brighten a space. Incorporate some color by hanging curtains in a rich color. Make sure you choose a shade that complements the rest of the room for a cohesive look.
Play with pattern. Show off your personality with a bold print. Patterned curtains can create a dramatic effect in a room. Use them to create a natural focal point in a bedroom, dining room, or living room. They can also add a touch of whimsy in certain spaces, such as a kid's bedroom.
Create height. If you have low ceilings, curtains allow you to create the illusion of height. Hang them above the windows to make the room appear more spacious. You can even hang them from the ceiling for a dramatic effect. When hanging curtains to create height, choose a pair long enough to touch the floor.
Pair curtains with blinds. You don't have to choose between curtains or blinds. Instead, pair them together for a classic look and extra privacy. Plus, this combination allows you to bring additional textures into a room, creating a cozy and intentional space.
Sources: Goodhousekeeping.com, Energizingspaces.com, BHG.com
Q&A
What's the Ideal Credit Score for a Mortgage?
QUESTION: What credit score do you need to buy a home?
ANSWER: When you apply for a mortgage, your credit score will be a major factor in the amount you're approved to borrow and the loan terms. So, what score should you aim for? The answer is it depends on the type of mortgage and its requirements. Your loan officer can help determine what mortgage types and terms are the best fit for you.
Conventional loan: For a conventional mortgage, the most common type of home loan, you'll need a minimum credit score of 620. However, some lenders may prefer borrowers to have credit scores of 680 or above. Plus, you'll usually get better rates with a higher credit score.
Federal Housing Administration loan: An FHA loan usually has lower credit requirements than a conventional loan. Typically, you can qualify for an FHA loan if you have a credit score of 580 and can make a 3.5% down payment. If you can make a higher down payment, you may be eligible for an FHA loan with a credit score as low as 500.
U.S. Department of Agriculture loan: The USDA insures loans for low- to middle-income borrowers who purchase homes in rural areas. There are no official credit requirements for USDA loans. However, you'll usually need a score of 580 or above to qualify - similar to an FHA loan.
Veterans Affairs loan: Like USDA loans, there's no minimum requirement for VA loans. However, you usually need a minimum credit score of 620. In some cases, you may get approved with a credit score as low as 580.
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