4 Reasons Why 2019 Will Be a Good Year for First Time Home Buyers to Get Approved for a Mortgage

The real estate and mortgage markets are unpredictable in the best of times. For many potential buyers at the end of 2018, it may be difficult to decide if you should buy in 2019 or hold off. There is still a lot unknown about where the housing and mortgage markets will be in a year. Real estate experts look at trends to decide what may happen in the market in the next 12 months.

Below are some of the top trends that experts are seeing that could be a reason for first time buyers to get a mortgage:

#1 Rates Are Rising

In 2018, the housing market has been strong, but it has started to stall because rates are climbing slowly but surely. For some buyers, this fact may have caused them to be unable to buy a home in certain markets. This is because a home that you could have afforded when rates were under 4% is now unaffordable with rates near 5%.

So, if rates are rising, why should you get a mortgage in 2019, you ask? We argue that you should buy in 2019 because it is unlikely that rates will drop in the next two years in any major way. The Fed has decided to stop with the super low to zero percent rates of the post-recession recovery period. It is trying to get the country back to a 'normal' interest rate environment. This means, in our view, that the days of 3% and 3.5% mortgages are gone for years to come.

Even if rates are near 5%, this is still a very low rate, and is probably the best you will see for years. Few experts are predicting a major drop in rates in the next 2-3 years. So, with rates rising but still low, you may want to go ahead and get that mortgage application done.

#2 More Low Down Payment Loan Options

After the housing downturn, it became difficult for good credit borrowers to get a home even with 20% down. As the years have passed and lending rules have changed, it is getting easier in 2019 and beyond to get a mortgage with a low-down payment. This is especially helpful to people such as first-time buyers with less money to put down.

In 2019, there are many low money down options. FHA loans are growing in popularity because only 3.5% down is required. You also can get an FHA loan with all of the down payment coming as a gift from a friend or relative. This makes the FHA loan very attractive especially for lower credit score borrowers.

Another option are various 3% down programs offered through Fannie Mae and Freddie Mac. If you are military, you can get a 100% financing VA loan.

In 2019, you do NOT usually need to put down 20%, which is great news for first time buyers!

#3 Dodd-Frank Changes May Ease Mortgage App Process

President Trump signed Dodd-Frank reform legislation this year to lift lending restrictions on smaller banks, community banks and credit unions. This act means that more lending institutions may be available to you to offer loans. Competition always is a positive in the market. You may find more options as a first-time buyer through some of these smaller lenders. One twist on this act is that these new loans offered by small lenders have to be kept in house and not sold on the mortgage market. Does this help first time buyers? It might; if the loans are not to be sold on the market, they need not conform to many federal standards established by Fannie and Freddie. You may be able to locate a loan that is very good for your situation. It also means you may need to hunt around a lot with many small lenders to find the best program for your needs.

#4 Minimum Credit Score Requirements Are Dropping

The days are gone when you needed a 740 score to get a loan. In 2019, you may be able to get a conventional Fannie/Freddie backed loan with a 620-credit score. Higher is better but it is possible with 620. With FHA, you only need a minimum 580. Some lenders could have higher requirements so be ready to shop.

Generally, you will find a friendly mortgage lending market for first time buyers in 2019. So, if you are on the fence, we encourage you to speak with several lenders today and get ready to get your application in as the new year approaches.

References:

https://www.newfi.com/2018/09/the-3-big-trends-affecting-your-ability-to-qualify-for-a-mortgage-in-2019/

https://www.crediful.com/credit-score-to-buy-a-house/