Just wanted to share my recent mortgage experience. My advice to anyone looking to buy a home is that there are still good deals out there despite the higher interest rates! Applied and preapproved on 9/20/2022 with a local loan originator for a major national lender and closed on the new house last week (11/01/2022).
I am a first time homebuyer and had limited cash to close so went with an FHA loan for the 3.5% down. $100k per year W-2 income, no other debt except for about $10K in credit card balances on one low rate credit union BT card. My middle mortgage FICO score was 687, weighed down by some 60/90 day lates in 2020 from when I lost my previous job during COVID and a couple of 60/90 day late payments on a student loan from 2016 (since paid in full).
I was looking for a home in the $400k range and put in an offer on my dream house in the beginning of October, which was listed at $420k. The home had been on the market almost a month, which would have been unheard of just a few months ago! I live in a midsized southern city that had a lot of remote workers relocate here from higher priced areas, so almost everything in this price range went under contract in a day or two for 10%+ over asking price when rates were low. My realtor put in an initial offer for $399k and the sellers countered with $408k, which I was VERY happy with. The house probably would have sold for $450-500k in 2021 or early 2022 considering it's in the best school district and a walkable part of town.
Before I put the offer in, my MLO called me multiple times to redo the loan estimates as interest rates were rising quickly. I was quoted a monthly payment of about $3250 at 6.25%, but then the points required to lock in that rate kept going up, from $3k to $7k to $10k extra due at closing. The day before I put in the accepted offer for my house, my MLO's manager got on the phone and said something to the effect of "you know what, business is really slow and we really want to make this deal...we'll cover the points since I know you have only $25,000 cash to close." I was impressed by their offer as I might have been a few thousand dollars short of the amount needed to cover closing costs and my 3.5% down payment if I had to pay the full price for points.
The underwriting process and closing were as smooth as could be - I am over the moon at how easy the whole process was! Yes, I'm stuck with a high interest rate for now but if rates ever go down, I can always refinance, and if they don't go down any time soon, I expect my income to increase significantly over the next couple of years so I can pay down the principal. Honestly, I prefer a higher interest rate and more stability in the housing market to the chaos and bidding wars that I would have faced if I had bought a house in 2021.
Hope this helps some of you out there who are "on the fence" about buying a house in a high interest rate environment. Lenders are willing to negotiate with you, perhaps more than before, because mortgage volume is down so much.
12/2022 TU 704 - EX 697 - EQ 705
Current Cards: PSECU $20,000 - NFCU Cash Rewards MC $21,900 - Chase Southwest $15,000 - Discover It $10,000 - Citi AAdvantage Platinum $9,500 - Apple Card $6,000 - PenFed Promise $5,000 - Truist Enjoy Cash $4,500 - Comenity Bread Cashback Amex $3,500 - BoA Customized Cash Rewards $2,800 - UVA Credit Union Visa Classic $1,600
