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Mortgage Trends for 2024 – What Potential Homebuyers Need to Know

As mortgage rates remain at high levels, prospective homebuyers have delayed making offers. But with the Federal Reserve’s recent rate cut and signs of decreasing inflation, many are anticipating mortgage rates to gradually decrease from 2024 onwards.

As such, this will present those looking to enter homeownership an opportunity at a competitive rate. Here are some key mortgage trends for 2024 that they should keep an eye on.

Interest Rates

Homebuyers should take comfort knowing that mortgage rates have not skyrocketed recently despite market fluctuations; however, pandemic-era lows won’t return anytime soon.

As such, many homeowners still hold onto mortgages with interest rates near or above 5%, according to a 2023 Fannie Mae survey. More than one fifth of mortgage borrowers indicate that this low rate prevents them from selling and buying another home.

However, September’s big Fed cut offers hope of lower rates heading into fall – potentially offering homebuyers who haven’t made up their mind whether to buy now or wait until rates decline further a much needed decision-making advantage.

Technology

Technology has played a crucial role in streamlining the mortgage process, such as online applications where borrowers can complete everything from pre-approval to closing without speaking with or visiting any loan officer in person.

Technology enables lenders to automate processes such as income and asset verifications and property valuations, saving both time and resources while decreasing errors.

Technology is making it easier for borrowers to obtain mortgage loans via direct-to-consumer and marketplace lending platforms, particularly those leveraging emerging technologies like artificial intelligence and blockchain for an improved mortgage experience. This makes the experience especially appealing for tech-savvy borrowers searching for alternative and sustainable funding solutions.

Flexibility in Lending Criteria

After years of rising interest rates and house prices, prospective homebuyers may have given up hope of ever being able to afford their dream homes. But the mortgage industry is in transition; innovative products exist that can assist borrowers navigate this ever-evolving environment with confidence.

Mortgage rates remain higher than they were during the pandemic, yet are gradually coming down as economic factors adjust to address them. Global economic events, governmental monetary policy and supply and demand dynamics all play a part in shaping mortgage rates.

As a result of the Federal Reserve rate cut and subsequent decrease in inflation, Freddie Mac predicts that mortgage rates will fall below 7% this year – fantastic news for prospective homebuyers!

Catering to Diverse Buyers

Potential homebuyers who have been waiting to buy until mortgage rates drop may want to reconsider. According to a U.S. News survey, 85% of those wanting to buy planned on doing so when rates dropped below 6% — something which has yet to happen and may never happen within three years.

Lenders can gain an edge by meeting the needs of prospective buyers from diverse backgrounds. One approach they can take to do this is by hiring staff that are representative of these communities and reaching out directly. By doing this, lenders can show they understand each borrowers’ unique financial situations and needs.

Sustainable Financing Options

Sustainable home financing options are expanding, offering buyers more choices to make upgrades that add long-term value and reduce carbon emissions. Mortgage lenders may be more amenable to accommodating such investments if potential homeowners can demonstrate how the costs will be offset through reduced utility bills or decreased carbon emissions.

If you are seeking to purchase a home that requires energy-saving upgrades, a green loan or mortgage could be the right financial tool. These loans typically offer lower interest rates and longer repayment terms than standard mortgages.

As a starting point, use a mortgage calculator to experiment with higher monthly payments and determine how they compare with expected savings from energy-efficient investments. And always shop around before making your decision!

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