LITTLE ROCK, Ark. (KTHV) -- According to the Mortgage Bankers Association, applications for home loans and refinancing activity were down the first two weeks of August in response to rising interest rates. But as Scott McElmurry, President and CEO of Bank of Little Rock Mortgage, explains you can still find a good deal if you're in the housing market.
Was this drop in loan applications for August unexpected?
Not really. We predicted that rates would rise after the first half of the year and for some potential homebuyers the slight increase plays a role. But often loan applications are down in August because people like to move into their new home before school starts. The biggest home buying/selling months have traditionally been in June and July. In fact, even as rates rose this summer, the MBA's Builder Application Survey showed that mortgage applications for new home purchases in July increased by 14% over the previous month. Much of the decrease can be attributed to a decline in refinance applications.
Do you see loan applications increasing any time this fall and winter?
We anticipate a continued demand for new home purchase loans through early fall. We're seeing an increase in consumer confidence and rates that are still at historic lows. Right now, the rate for a 30-year mortgage is 4.5%. So buying a new home or refinancing your current home still makes sense. September and October are typically strong months as the kids get back in school. In addition, rates are predicted to rise further, so many new home buyers may be accelerating their plans to take advantage of these low rates
What about first-time home buyers? We've heard it's harder to get a loan these days. What options do people have today?
It's not that the qualifications are more stringent necessarily, but the process may be harder for some. The government has instituted a variety of new rules that make the process a bit more cumbersome for some, while also eliminating the excesses of the past like no income or stated income loans. While a 3.5% down payment is the general minimum down payment, it's still possible to get 100% financing if you're a first-time buyer or a veteran. You should simply ask a reputable financial institution if you qualify.
Also, before applying for a loan you should have the following:
• Reliable Income
• Good Credit (typically 640 or higher)
• 3.5% Down Payment