I’m not talking about the elevator, thought it does make a great starting line for a joke. I’m talking about mortgage rates. Back in the good old days, as in last September, the going rate was about 3.4%. Currently the prevailing rate is almost 4%.
So this is bad for the housing market, right?
Not exactly. Yes – rates have risen. But, and there’s always a but, the good news is that the mortgage requirements have become a little easier as the rates have risen.
Two things factor into this statement.
First is the FICO score. This is also called your credit score which is a big part in the determination of a buyer’s ability to secure a mortgage. In September, rates were lower, but in order to secure conventional financing one needed a minimum credit score of 731. As of February the necessary credit score was 720.
The next factor is the amount of the necessary down payment. A low down payment ( less than 5%) is becoming more common lately. In 2011 only 2% of buyers had a down payment of less than 5%. In 2012 that number rose to 3%. It was 7% in 2013 and 2014, 6% in 2015 and up to 10% in 2016. So far in 2017 17% of home purchasers put down less that 5%.
So while the interest rates are creeping up, it’s becoming easier for buyers to qualify for the mortgage necessary to purchase their next (or first ) home.