Smart Ways to Hurdle Foreseen Rise in Mortgage Rates


Forecasts of a sustained rise in mortgage rates in 2015, coupled with prevailing tight lending standards, may look as daunting, particularly for prospective first-time home buyers in search of Sarasota homes for sale. Nevertheless, the dream of homeownership amidst such headwinds remains highly possible with the help of a professional agent, Sarasota Bay Real Estate (SBRE) maintains.

First, what’s important is for buyers to have a mindset that the regime of record-low mortgage rates is now over, the full service realty firm says, noting the belief of economist Dr. Bill Conerly that rising rates come as an economy expands. For 2015, Dr. Conerly sees the average rate for a 30-year fixed mortgage to reach 6%, compared with the 4.1–4.5% approximate range for the first nine months of this year.

Notably, this 6% forecast is at the higher end of analysts’ predictions. Freddie Mac, the Mortgage Bankers Association and the Home Buying Institute all expect 5% averages by the end of 2015. The chief economist of the National Association of Realtors, Lawrence Yun, sees the 30-year fixed rate averaging 5.5% in 2015.

Loans readily available

Smart Ways to Hurdle Foreseen Rise in Mortgage Rates

What is encouraging though is that mortgage financing has become more readily available as lenders seek to avail of the rising opportunities brought about by the sustained housing market recovery. In particular, portfolio lenders want a larger share of the action in the Southwest Florida market because of the pent-up housing demand in the area, SBRE notes. At Insignia Bank of Sarasota, for instance, their lending team has been increased to six officers from the original two. The bank is eying an eight-man complement by the end of this year to serve borrowers seeking financing on Sarasota homes for sale.

It is also noteworthy that some lenders are responding to customer concerns on the tight lending standards and are partly relaxing their loan rules. A summer survey of the Federal Reserve showed that 39% of big banks said that they were “somewhat” easing residential mortgage rules. Increasing their credit available to home buyers has likewise been indicated by several federal agencies. One of these is the Federal Housing Finance Agency, which oversees Freddie Mac, Fannie Mae and the Federal Housing Administration.

Who’s a good credit risk?

The home loan borrowers who will find the sailing smooth with bankers nowadays are those with 740 credit score or better and a stable, two-year work history with W-2 salary income. Additionally, their maximum debt-to-income ratio shouldn’t be over 50% and the added housing debt shouldn’t exceed 39% of income.

They should also be able to pay a 20% down payment on the home purchase. Documentation of every deposit into their bank accounts is another important loan requirement.

Options for borderline borrowers

Those who will find these regulations as major hurdles are borrowers with irregular incomes such as those self-employed and others earning on sales commission basis. Also likely to be on the borderline of qualifying for mortgages, especially with the increased rates seen next year, are the millenials or home buyers over 50 years of age. Younger families that may still be saddled with student loans are likewise more probable to be at the edge of qualifying for mortgages.

However, this doesn’t necessarily mean that these less-than-perfect mortgage borrowers are totally shut out of homeownership. What they may have to adopt is a more realistic mindset and temper their buying plans by exploring options for other types of available housing. Among these are the single family home fixer-uppers and those more affordable condo and townhome choices of which there are plenty among the current MLS listings of Sarasota homes for sale.