The 2022 Market: Must-Read Guidance from a Mortgage Expert

GECU Voices brings you guidance and insight from experts within the Credit Union. Today’s video stars Andy Dunn, Senior Vice President Mortgage Operations. 

It’s no secret that today’s housing market is fast paced with low inventory. But unlike 2021’s record-low mortgage rates, 2022 homebuyers will see higher rates coupled with the same low inventory. Don’t let this discourage you! Knowing what to expect and receiving guidance from the experts will help you navigate the process. Let Andy Dunn, the Senior Vice President of Mortgage Operations at General Electric Credit Union (GECU), get you up to speed.  

The pre-approval process

Why is it important to get pre-approved?

Getting preapproved essentially jumpstarts the homebuying process, which is especially important in today’s low-inventory market. Sellers will feel more confident accepting your offer because they know you can close the loan quickly. 

But wait to get pre-approved until you’re about ready to buy because it only lasts so long. You don’t want to get preapproved today only to wait six months to look for a house. Plus, going through the pre-approval process twice affects your credit score. Lenders do a hard pull on your credit, which temporarily lowers your score. Reapplying triggers another hard pull, further impacting your score. 

Are there steps to take before getting pre-approved?

Check your credit score and report prior to getting pre-approved. For the latter, this gives you an opportunity to spot any incorrect information that could negatively affect your score. Take time to report discrepancies, if there are any, before moving forward with the mortgage loan process. In doing so, you stand to improve your credit score and open the door to more favorable rates in return. 

Your Debt-to-Income ratio (DTI) will help a lender determine your ability to make on-time payments. High amounts of debt may whittle away at your loan options and take away favorable terms and rates. Try to reduce your total debt prior to getting pre-approved to boost your purchasing power. Even small payments can help. 

Rising rates 

How will rising rates affect homebuyers?

Rising rates will make financing a home slightly more expensive. The higher monthly payment will likely only be marginally more than if you tried to finance the same home back in 2021. Homeowners will need to review their budget to determine if this increase is something they can reasonably manage before applying to refinance. 

How will rising rates affect refinancing?

Many Americans took advantage of the record low rates and refinanced their homes in 2021. This year, rates are still awesome – just slightly less so than a year ago. For this reason, it’s worth looking into a refinancing opportunity if you missed out on a great rate last year.  

Down payment options

Does the 20% down rule still apply?

Putting more money down helps you avoid paying more in interest over the life of a loan. Not only this but putting down at least 20% will help you avoid private mortgage insurance (PMI). This insurance serves as a safety net for lenders should you default on a loan. For this reason, many financial experts in the past have suggested putting down 20% on a house. But it’s important to remember there isn’t a set rule. What you choose to do should depend on what’s viable for you and your unique situation. In 2021, the average cost of a home in Ohio was $181,756.1 A 20% down payment would require you to have over $36,000 on hand – an amount that’s not doable for many people. 

What are alternatives to the 20% down rule?  

You may want to put less than 20% down on a loan and pay PMI if you have a great monthly income and can afford the payments – but don’t have the savings for a more substantial down payment at this time. On the flip side, if someone has the savings but not the monthly income, it’s advantageous to consider a 20% or even 30% down payment. 

If you’re ready to get pre-approved and start the process of getting into your dream home, consider working with a local mortgage loan expert. Here at GECU, we understand the housing market here in Cincinnati, OH. From Oakley to Covington and everywhere in between, we have the knowledge to turn your homeownership dreams into new possibilities. Open the door to fantastic rates and a rewarding Credit Union membership by confirming your eligibility and your mortgage loan online.