How to Get the Best Mortgage in 2023 – Forbes Advisor

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Between record house prices, mortgage rates, rising inflation and recession fears, homebuyers have been tested this year. This has created more uncertainty heading into 2023 for many homebuyers looking for an affordable mortgage.

First-time homebuyers have felt the pressure in particular, as soaring home prices and mortgage rates have reduced their down payment and purchasing power.

As housing market conditions begin to improve, albeit very slowly, keeping a close eye on the mortgage market — and any government economic action — should be your top resolution for 2023 if you hope to land the best mortgage for you.

How inflation will affect mortgage rates in 2023

In its efforts to contain rising inflation, the Federal Reserve aggressively raised its benchmark federal funds rate throughout 2022. Although Fed rate hikes do not directly impact mortgage rates, they do affect the bond market, which directly impacts mortgage rates.

“Until the Federal Reserve deems runaway inflation to be under control, it will continue to aggressively raise the federal funds rate, which, in turn, will continue to drive up mortgage rates,” he said. Rick Sharga, executive vice president of business intelligence at ATTOM. leading real estate data curator.

Wells Fargo economist Charlie Dougherty expects the Fed to make more rate hikes in 2023. However, he says the increases will be less aggressive compared to 2022.

Nevertheless, Dougherty and other experts predict that mortgage rates will remain high, at least for the first few months of 2023.

“The economic consensus seems to be that there will be strong signs early next year that inflation is fading,” said Mark Fleming, chief economist at First American Financial Corp. But “all signs point to more upward pressure on mortgage rates than downward in early 2023.”

When will be the best time to get a mortgage in 2023?

With mortgage rates at record highs, house prices which have yet to normalize and uncertainty across the housing marketmany buyers pulled out of the market.

So, will 2023 be a better year to get a home loan?

When it comes to house prices, many housing experts say we’ll start to see more month-over-month declines next year.

“We now expect home prices to register year-over-year declines in 2023, with the national median price of existing single-family homes expected to fall 5.5% over the year,” Dougherty says. “That said, the long-standing supply shortfall and strong underlying demand will ultimately limit the extent of home price depreciation.”

However, home depreciation will not be uniform across the housing market. Rather, there will be regional variations, with previously white-hot markets seeing extreme downward swings relative to less popular markets, Dougherty says.

Keep in mind that home appreciation has skyrocketed abnormally in recent years. The average selling price of a home jumped 45% to $542,900 in the third quarter of this year compared to the second quarter of 2020, according to the St. Louis Fed.

When it comes to mortgage rates, some experts predict that the best case scenario for a 30-year fixed rate will be around 5.5% by the end of 2023. Others expect rates to remain in the 6.5% to 7.5% range throughout the year, Freddie Mac predicting an average of 6.4% in a recent forecast.

Related: Mortgage forecast for 2023

Advice for homebuyers in 2023

Given the ongoing fluctuations and uncertainties in the housing market, trying to figure out when to get a mortgage often requires more luck than skill. Real estate experts generally suggest buying the home that’s right for you and your needs – and staying there for at least five years – rather than timing the market.

Nonetheless, there are still steps you can take now that will put you in a stronger position when you’re ready to shop around for a mortgage.

“Take the time to research and understand the market,” says Ward Morrison, president and CEO of Motto Franchising, the Denver-based company behind Motto Mortgage. “Also be sure to research a variety of loan types.”

Here are other ways to be proactive:

  • Understand your credit score. See if there are ways to improve your credit score. If you can increase your score, it will help you get a lower mortgage rate, which means lower mortgage payments.
  • Meet the lenders. Getting to know the lenders and loans you potentially qualify for will put you in a stronger position once you’re ready to buy a home. Shop online, by phone or in person at a branch to find the best mortgage lender for you.
  • Review your financial situation. Look at your monthly debt payments against your usual income to determine a comfortable monthly payment amount so you know how much house you can afford. You may find that you have to broaden your search to places where house prices are lower.
  • Use a mortgage calculator. Once you have an idea of ​​the types of loans you qualify for, calculate your estimated monthly payments, enter your numbers into calculators such as a 30 Year Fixed Mortgage Calculator, 15 Year Fixed Mortgage Calculator, FHA Loan Calculator Where mortgage amortization calculator.
  • Manage your money. Use this time to save money on your down payment. The more you can invest in a home, the smaller the loan you’ll need and the less you’ll pay for a mortgage overall.

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