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Mortgage rates drop for third week in a row, but home buyers remain reluctant

Mortgage rates may be falling, but buyers aren’t convinced now is the right time to buy. (iStock )

There’s good news and bad news about mortgage rates this week. The good news is that rates continue their gradual downward trend, with a 30-year fixed rate mortgage averaging 6.87%. Freddie Mac is.

While this is encouraging, interest rate cuts are far from the norm. Last week, the average rate on a 30-year mortgage was 6.95%. But rates this week and last week are still relatively high compared to a year ago, when the average rate was 6.67%. Still, any improvement is better than none.

“Mortgage rates have fallen for a third consecutive week on signs of subdued inflation and market expectations of future Fed rate cuts,” explained Sam Carter, chief economist at Freddie Mac. “Lower mortgage rates and a gradually improving housing supply bode well for the housing market. Prospective homebuyers should remember that mortgage rates can vary widely from lender to lender, so it’s important to shop around for the best mortgage rate.”

In addition to 30-year rates, 15-year mortgage rates also fell this week but are still above the 6% mark. Rates on 15-year fixed-rate mortgages averaged 6.13%, down slightly from last week’s average of 6.17%.

When you’re ready to compare mortgage offers, consider using Credible, which makes it easy to compare interest rates from multiple lenders in just a few minutes.

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The average American must pay more than $100,000 in monthly mortgage payments

Down payment requirements for the average homebuyer are increasing nationwide. A middle-class income household would need to put down $127,750 on a median-priced home just to realistically cover the monthly payments. According to a Zillow study:.

This down payment represents about 35.4% of the typical U.S. home price of $360,000. With a down payment of this amount, buyers can keep their mortgage payments to less than 30% of their income.

Just five years ago, many families could afford the monthly mortgage payments on a new home without making a down payment.

“Down payments have always been important, but they’re even more important today,” said Skylar Olsen, chief economist at Zillow. “With too little down payment, buyers may have to wait longer for the home they want to get on the market, especially now when buyers have less money to pay. What happens to mortgage rates during that time could mean the difference between being able to buy the home or not.”

It would take many moderate-income families 12 years to save up the necessary down payment, which assumes they put aside 10% of their income — an unrealistic goal for many facing rising costs in all aspects of life.

“Without outside help, like gifts from family or a booming stock market, it’s extremely difficult to save enough,” Olsen says. “Some people move around the country in order to make their finances work, buying co-ops or homes with extra rooms to rent out. Down payment assistance is another great tool that’s all too often overlooked.”

Sites like Credible allow you to browse multiple mortgage lenders and get personalized interest rates within minutes, all without affecting your credit score.

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Homebuyers’ willingness to buy a home hits record low

Interest may have dwindled slightly, but prospective buyers don’t seem ready to jump back into the buying market. Fannie Mae Home Buying Sentiment Index It fell 2.5 points to 69.4 in May, suggesting buyers are not currently open to buying.

The drop pushed the index to its lowest point on record. In May, only 14% of consumers thought it was a good time to buy a new home, down from 20% in April. Consumers still believe that home buying will remain difficult for most buyers, at least for the time being.

“Consumer sentiment towards housing has declined from its recent slump as a growing share of consumers struggle to see the upside in the current housing market,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Earlier this year many respondents were optimistic that mortgage rates would fall, but that never happened and current sentiment reflects pent-up frustration over the overall lack of affordability of homebuying.”

“This is most clearly demonstrated by the ‘good time to buy’ category hitting its lowest point in survey history this month, while homeowners’ perceptions of home sales conditions only dipped slightly and remain broadly positive after a steady increase over the past few months,” Duncan said.

To see if you qualify for a mortgage based on your current credit score and salary, consider visiting Credible, which allows you to compare multiple mortgage lenders at once.

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