Interest rates up again

I know I wrote about how rates were headed in the right direction. They did go down a little but after last week’s rate hike by the federal reserve, they went up to 6.81% for the 30-year conventional mortgage. (Freddie Mac)

That is high, especially considering how expensive houses are. Last week I was talking with some older homeowners who pointed out that when they bought a house rates were over 8%. At the time one of them had a job that paid $3.50 an hour and the house cost $15,000.  The house cost about the same as two years’ income.

The table below shows how much income is needed to buy a house in Minnesota. The numbers are provided by Minnesota Housing Agency.

Household Size 11-County Twin Cities Metro Area* Dodge and Olmsted Counties
1- 2 Person $89,000 $89,000
3 Person $101,000 $101,000
4 Person $112,000 $112,000
5 Person $121,000 $121,000

 

Interest rates in July 2023 are heading in the right direction

Mortgage interest rates are in the news a lot these days. Interest rates matter. Housing was already expensive before the rates went up. Mortgage interest rates have gone down a bit which is better than up but they are still high.

The rates are not slowing down home sales but they are causing homeowners who are paying less interest to stay put which means they are not putting their houses on the market.

Personally, I would hold off on buying a house until the rates go down but I am in the minority.

Graph showing mortgage interest rates
Mortgage Interest Rates

What was I thinking?  The Federal Reserve raised rates and as of July 27, 2023, the 6.78 on the chart is 6.81 – that is high. Experts claim this is the last rate hike. We shall see . . .

Mortgage rates up again

Mortgage interest rates rose last week and are hovering around 7%. I’ll update this post later today when Freddie Mac posts the average rates for the week.  The demand for mortgages is at a three-month low.

Rates will likely go down again but only if the US debt ceiling is increased. If not look for mortgage rates closer to 8% and more.

This might be the best time to hold off on buying a house unless you can pay cash.

As for selling a house, they are still selling quickly and often with multiple offers. Cash offers are fairly common this year.

 

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Here are the updated weekly mortgage rate averages.

Chart from Freddie Mac with mortgage rates
Latest mortgage interest rate averages. 6.1.2023

Cash offers and closing costs

coinsThere are always closing costs when buying real estate. Most closing costs are related to the loan. There are origination fees and the buyer pays for the appraisal. In Minnesota, there is a mortgage registration tax. There is a fee for the buyer’s credit report and more.

Home buyers with financing will get a good faith estimate and will know what the closing costs will be. Generally, the buyer can expect to pay closing costs that will add up 3% of the sale price. Sometimes buyers ask the seller to help pay the closing costs.

When the buyer is paying cash they will still pay for title insurance, a closing fee, a title search, and a few more fees. Prorated taxes and HOA fees. There is no good faith estimate. The best way to find out what the closing costs will be is to get an estimate from the title company that will do the title work and the closing.

The closing costs for an all-cash offer are much lower than what they are when the purchase is being financed.

With a cash offer, the buyer needs to make sure they have enough cash to pay for the real estate and the closing costs. Asking the seller to pay the closing costs is exactly the same as paying less. Sellers do not like to pay the buyers closing costs.

When the purchase is being financed we understand that the buyer may not have enough cash for downpayment and closing costs.

People who are offering cash should get an estimate of what the closing costs will be and make sure that they have enough cash to buy the property and pay the closing costs.

Buying real estate always costs more than the sale price.