For the 15 percent of Americans planning to buy a home in the next 12 months, two of their key considerations will be location and getting the ideal home financing deal. When it comes to the state you choose to purchase a home, your choice can be influenced by much more than the difference in average price per square foot. Homeowners also consider burglary rates, home appreciation ratios, and state school rankings. However, it turns out that the state you choose to purchase a home can also drastically impact another important aspect of the home buying process: your mortgage chances. The average mortgage rate across the U.S. currently stands at 3.99 percent, but in some states like Lousiana, mortgage rates can be up to 0.12 percent lower. So while your financial health plays a large part in your mortgage prospects, state-specific factors can play a just as important part in determining the rates on your mortgage.
Your State’s Foreclosure Rate Will Have An Impact
In a state or neighborhood where the foreclosure rate is high, you are more likely to see lower house prices. That is because foreclosed homes can decrease surrounding house prices, and in some cases, drive property taxes even higher. In a study by Harvard and MIT, it was found that foreclosure rates can negatively impact the price of homes within a quarter-mile.
For mortgage lenders, states with high foreclosure rates also raise the risk in their eyes. Foreclosure proceedings are often the last resort for mortgage lenders because they can cost time a considerable amount of time and money. The uncertainty of the housing market will also affect mortgage rates. For instance, the Nashville housing market remains unpredictable, thanks to rising unemployment and blurred rebound markers. Because of this, the mortgage lenders Tennessee residents have to choose from may differ from those in neighboring Kentucky and North Carolina, where the real estate market has rallied through the crisis.
State Foreclosure Laws Lengthen The Process And Increases The Costs
Currently, 22 states have judicial foreclosure laws in place, including Virginia, Iowa and Delaware. This means that lenders are only allowed to go through the court system. For lenders, this can cost more money and time. Judicial foreclosures take at least 3.5 months. However, states that allow non-judicial foreclosures enjoy a much quicker foreclosure process. For example, in Georgia, it can take just 37 days. However, in Delaware, a judicial foreclosure can take at least five to six months. For lenders, the tighter lending and foreclosure restrictions can raise origination and process costs, which in turn drives them to increase their mortgage interest rates to compensate for this.
Economic Prospects For The Local Economy Boosts Confidence For Lenders
Mortgage lenders want to have confidence in their clients – and the economy. The state of the local economy will impact homeowners, which indirectly impacts their ability to keep up with payments and the returns for a mortgage lender. Therefore, it is always recommended that you consider the economic outlook for the state you are considering. States with high growth and employment rates project also have high consumer spending. This, in turn, can drive mortgage rates higher as consumers drive demand for housing and more lending opportunities.
Keep in mind that your financial profile still carries weight. While your location will impact your mortgage rate offers, it does not outweigh the influence that a good credit score and a solid financial picture have on your mortgage prospects. To get mortgage ready, check your budget. Most lenders prefer that applicants spend no more than 28 to 30 percent on mortgage payments. If you can, improve your income streams. The more income you have coming in, the better chance you have of getting approved or securing a larger loan to value amount.
Alternatively, consumers can focus on reducing their debt obligations in the months leading up to their mortgage application. Finally, keep an eye on your credit score. Keep your payments on time, avoid opening too many new accounts, and stick to the recommended practices for boosting your credit score. A better credit profile puts you in a stronger position for lower interest rates.
