Getting a Mortgage in 2019? Here’s What to Expect
The new year is a fresh start, and for many people, this means getting a better grip on their financial situation.
But while some people develop a strategy to pay off debt or increase their emergency fund, your attention might be on buying a house and getting a mortgage. Here’s what you need to know about getting a mortgage in 2019.
Bigger Loan Limits
The Federal Housing Finance Agency announced in November 2018 that it would increase the loan limit on conforming loans from $453,100 in 2018 to $484,350 in 2019 (with limits as high as $726,525 in high-cost areas).
Conforming loans are those backed by Fannie Mae and Freddie Mac. These types of loans are attractive because they tend to have lower mortgage rates, as well as lower down payments and flexible credit score requirements.
Buying a property that’s higher than the conforming loan limit requires a jumbo loan, which can be harder to get. A jumbo loan may require as much as 10% down or a minimum credit score of 700.
Therefore, a higher loan limit for 2019 will make it easier to qualify for a conforming loan in areas with rising home prices.
Mortgage Rates Predicted to Increase
According to the Mortgage Bankers Association, interest rates for 30-year fixed-rate mortgages could reach 5.1% by the end of 2019. What does this mean for you?
Higher mortgage rates increase borrowing costs and reduce buyer affordability. With that being said, now’s the time to act if you’re thinking about getting a new mortgage this year — and the sooner you act the better. Buying a property near the beginning of the year means you’re able to deduct the most mortgage interest on next year’s tax return, if you itemize.
Now might also be an appropriate time to explore refinancing and taking advantage of a lower interest rate. Refinancing creates a new mortgage, so you’ll have to apply for a new home loan and repeat the underwriting process. Be mindful that your income and credit score must meet lending guidelines, and you’ll have to pay closing costs again. These fees range from 2% to 5% of the mortgage balance.
The upside is that a lower mortgage rate can potentially reduce your home loan payment, freeing up cash in your budget.
Watch Your Tax Deductions
If you’re self-employed and thinking about buying a home in 2019, keep in mind that too many business write-offs can lower your net income significantly, reducing purchasing power. Remember this when preparing your 2018 tax return.
Naturally, you want to deduct as many legitimate business expenses to reduce your tax liability. And any competent accountant will be on the lookout for every possible deduction available to you. The problem with this approach is that it can lower your net income too much. So even if you can realistically afford a particular mortgage amount, you might not show enough income for the loan on paper.
To avoid affordability issues, limit your number of business write-offs for one or two years prior to buying a home to maximize your net income.
Look for a Property in January
January is typically the slowest month of the year for real estate, which probably comes as no surprise since many people are recouping from the holiday season.
As a homebuyer, however, this is your opportunity to get an excellent deal on a home purchase. You’re less likely to deal with bidding wars. And with less interest and traffic, motivated home sellers may be willing to reduce their prices to generate a quick sale, or they may toss in a few incentives like closing costs assistance.
The Bottom Line
Cherry Creek Mortgage can get your new year off to a great start. Whether you’re buying, refinancing or exploring your home equity options, our loan experts can assist in every step of the mortgage process. Give us a call today and learn more about our amazing loan products.