Key Points to Consider for Those Seeking a Mortgage This Year

Securing a mortgage can be one of the most significant financial decisions you make, and navigating the process in today’s market requires careful planning and informed decision-making. Whether you’re a first-time homebuyer or looking to refinance, understanding current trends, preparing your finances and exploring new mortgage options can help set you up for success. From keeping an eye on interest rates to leveraging technology, these seven key points provide critical considerations to help you make the best choices in 2025.

1. Interest Rate Trends and Predictions for 2025

• Economic Factors: Mortgage rates are heavily influenced by Federal Reserve policies, inflation, and overall economic growth. If inflation stabilizes, rates may level off or decrease. Conversely, a robust economy might lead to rate hikes.
• Don’t Let the News Fool You: In 2024, the Federal Reserve cut interest rates twice.    Consumers were under the impression that mortgage rates would drop, but mortgage rates increased after the Fed lowered rates.   
• Strategy: Monitor market trends and lock in rates when favorable. Consider rate locks with float-down options for flexibility.

2. Always Considerer The 3 Cs of Mortgages

• Credit: Aim for a credit score of 740+ to secure the best rates. Pay off high-interest debt, avoid new credit inquiries and check for errors on your credit report.
• Capacity: Reduce your debt-to-income (DTI) ratio by paying down debt or increasing income. Document income sources meticulously, especially if you’re self-employed.
• Collateral: Save for a larger down payment to lower loan-to-value (LTV) ratios.    Keep your property well maintained to retain or increase its value.

3. Affordability Tips

• Home Prices: Research market trends to identify areas with stable or declining prices.    Speak with a real estate professional to get educated on what the housing market is doing in the community you are interested in.
• Budgeting: Use affordability calculators to set realistic expectations. Remember to account for hidden costs like insurance, utilities and unexpected repairs. In many cases, some of these hidden costs, mainly homeowner’s insurance and homeowner’s associations, have increased drastically.
• Down Payment Assistance: Investigate state or federal programs to reduce upfront costs.
• Temporary Interest Rate Reductions: Research different loan options such as 3-2-1or a 2-1 interest rate buydown, or an Adjustable Rate Mortgage.

4. Emerging Mortgage Options

• Green Mortgages: These offer incentives like lower rates for homes with energy-efficient upgrades or certifications.
• First-Time Buyer Programs: Programs like FHA loans (low down payment), USDA loans (for rural areas), and VA loans (for veterans) may help.
• Shared Equity Mortgages: Lenders share ownership in exchange for lower interest rates or payments.

5. Technological Advancements

• Online Pre-Approvals: Platforms like Mountain Country Mortgage streamline applications with instant pre-qualification.
• AI-Driven Underwriting: This allows for faster decisions with more accurate risk assessments. It used to take days to have a loan file underwritten. It now may only take hours.
• Virtual Signings and Closings: The days of having to physically go to the escrow company to sign your loan documents are starting to disappear. Many lenders are now doing hybrid closings, where you DocuSign a majority of the loan documents and only have to physically sign a few pages, or doing a completely virtual closing where you are able to sign and have everything notarized over a Zoom call from the comforts of your home.

6. Refinancing Strategies

• Rate Reduction: If rates drop, refinancing can lower your payments or shorten your loan term. These rate reductions can come fast and only last for a short period of time. In 2024, there was about a two-week window to take advantage of the lowest rates to refinance.
• Cash-Out Refinancing: Tap into your home equity for renovations or consolidating high-interest debt but beware of higher monthly payments.
• Break-Even Analysis: Calculate how long it will take to recoup closing costs on a refinance before committing.

7. Economic Considerations

• Job Stability: Underwriters look for consistent income over two or more years, so avoid job changes before applying.
• Savings: Maintain at least three to six months of living expenses in an emergency fund.
• Market Resilience: Understand local economic conditions, as regional markets may react differently to national trends.

If you are considering doing some type of mortgage in the coming months, take these items into consideration and it is very important to consult with a local mortgage and real estate professional to help guide you through the process. FBN

By Morgan Hagaman

Morgan Hagaman is the branch manager and loan officer at Mountain Country Mortgage. He can be reached at morgan@mountaincountrymtg.com or 928-607-0252.