Considering 2015's market conditions and interest rates, homebuyers may be able to afford a home in 2016 if they make a purchase early in the year.
Last year, homebuyers experienced both opportunities and challenges. Interest rates were at an all-time low, typically at 4 percent and below. However, housing values became pricier causing a decline in the number of affordable homes available in the market. Affordable homes, by definition, are homes with mortgages that should not exceed more than 28 percent of an individual's income. By December 2015, less than 63 percent of listed homes were considered affordable, resulting to fewer home sales. A slowdown in wage growth across the nation further compounded the issue.
Fortunately, housing prices are expected to level off this year. More homeowners are predicted to sell because of the equity increases seen in 2015. With more houses on the market, there will be less competition among buyers.
Even though the Federal Reserve will increase its interest rates in 2016, homebuyers can still strike a deal and enjoy affordable rates if they do it in early months of the year. Prospective borrowers in rural areas may still apply for loans insured by the US Department of Agriculture. In certain areas, a USDA loan will allow a buyer to take out a no-money-down loan creating a win-win situation because a lot of homes in rural areas fall into the affordable category.
Homebuyers in 2016 will be given more protection from questionable lending practices. In October 2015, new laws were implemented requiring lenders to provide loan applicants with a form that fully discloses the total cost of the loan plus taxes and insurance, within three days of application. The new laws also obligate lenders to provide applicants with the specific details about how their payments could change over time.
Additionally, this year, lenders are ordered by the law to furnish applicants with closing documents for review three days in advance of closing.
