How a Biden administration could affect your mortgage
As President-elect Joe Biden and Vice President-elect Kamala Harris prepare to take their places in the White House, you may be wondering what it might mean for your wallet.
With regard to homeownership, the new administration has proposed a number of measures that could make buying a home more accessible. With Rep. Marcia Fudge, D-Ohio, tapped to lead the Department of Housing and Urban Development, Biden and his team have floated several ideas that are garnering attention.
If you're preparing to buy a home or you're considering a mortgage refinance, here's a closer look at some changes you may expect in 2021 and beyond.
Mortgage rates are expected to remain low
In response to the coronavirus pandemic, the federal government took steps in early 2020 to try and curb negative economic impacts. One pivotal action involved the Federal Reserve's decision to cut interest rates to near zero.
A byproduct of that decision was record-low mortgage rates. As of January the mortgage rate for a 30-year fixed-rate loan was at 2.65%
Federal Reserve Chair Jerome Powell, whose tenure is set to last through 2022, has said the federal funds rate will remain low until the economy recovers. It's also worth noting that former Federal Reserve Chair Janet Yellen, who helped guide the economy out of the Great Recession, has been asked to oversee the Treasury.
"The Fed will most likely be given more independence and will be seen as less of an executive arm," said John Walkup, co-founder, and COO of real estate data analytics company UrbanDigs.
If you're interested in taking advantage of low mortgage interest rates now, you may consider getting prequalified. You can visit Credible to get prequalified rates without impacting your credit score.
SHOULD I BUY OR SELL A HOUSE DURING THE CORONAVIRUS PANDEMIC?
Homebuying may be more challenging
Between a down payment, closing costs and monthly mortgage payments, the costs of owning a home can easily add up. One of the most talked about Biden proposals involves the introduction of a $15,000 first-time homebuyer tax credit.
The credit would be aimed at helping young, first-time homebuyers and minorities. Qualified applicants could claim up to a $15,000 tax credit, similar to the $7,500 first-time homebuyer credit established under the Obama administration through the Housing and Economic Recovery Act.
The Mortgage Bankers Association forecasts mortgage originations will total $2.49 trillion in 2021, down from the $3.18 trillion estimated for 2020. Low mortgage interest rates were a significant driver of demand for real estate in 2020, even as home values increased 7.5%.
Walkup said the pandemic had a whipsaw effect on prices in many locations, as fear and uncertainty spiked. As buyer confidence gradually returned, more Americans entered the market. Looking ahead to 2021, it's important to be mindful of the market's temperature.
"Buyers should be aware that they're in an increasingly competitive environment," said Walkup. Zillow forecasts a 10.5% increase in home values next year while buyers may be faced with a narrower selection of properties. According to Realtor.com, national home inventory in 2020 declined by 39.2% over 2019's numbers.
With loan rates under 3%, now is a great time to refinance your mortgage. With Credible, you can find the best refinance rates and prequalify for a refinance within minutes.
REFINANCE BEFORE RECORD-LOW MORTGAGE RATES DISAPPEAR
Refinancing could still be a bargain
Refinance rates followed home purchase mortgage rates, achieving near historic low levels in 2020. Demand for mortgage refinance loans jumped 105% in 2020, as homeowners scrambled to take advantage of low mortgage rates.
Part of the demand for mortgage refinancing could also be attributed to the adverse market refinance fee, which took effect December 1. The 0.5% fee, which applies to new refinance loans, is expected to cost homeowners $500 for every $100,000 borrowed while helping Fannie Mae and Freddie Mac offset pandemic-related financial losses.
The Biden administration hasn't said specifically how the adverse market refinance fee would be handled, as other housing issues may take precedence. That includes the millions of homeowners who have fallen behind on mortgage payments as a result of the coronavirus pandemic.
Reversing the fee may be easier said than done, considering how it may impact Fannie Mae and Freddie Mac, as well as the mortgage market in general. Walkup said that similar to taxes, measures like the adverse market fee are easy to start but hard to stop.
If you own a home and are wondering whether it's a good time to refinance, it's helpful to compare rates and run the numbers. For instance, you may want to use a mortgage refinance calculator to estimate what your new monthly payments might be. You can also visit an online marketplace like Credible to view refinance rates and get cash out to pay off high-interest debt.
3 REASONS TO REFINANCE YOUR MORTGAGE IMMEDIATELY
Potentially more relief for renters
The federal CARES Act extended a temporary moratorium against rental evictions for people who were struggling financially as a result of the pandemic. As part of the latest stimulus bill, Congress has proposed an extension of the moratorium through the end of January 2021.
During his campaign, President-elect Biden called for rental forgiveness. That proposal was met with resistance from the rental industry, which suggested it could create a ripple effect that could negatively impact landlords as well as tenants.
Looking ahead to 2021, the new administration will be tasked with finding a workable solution to help renters hold on to their housing. Walkup said this most likely could include an extension of the moratorium as well as a renewed push for financial assistance for renters.
WHY IT'S A GOOD IDEA TO REFINANCE YOUR MORTGAGE WHILE RATES ARE LOW
The bottom line
The new administration could make home purchasing more attractive -- if your financial situation makes it possible to afford mortgage payments. Comparing mortgage rates can help you find the right home loan. And if you decide to buy, visit Credible to get in touch with experienced loan officers to have all your questions about the mortgage process answered.