Many people may be thinking about purchasing a home to immigrate to the U.S. or to enhance their life there. However, a mortgage is an important financial instrument involved in one of the biggest purchases of your life. It is important to understand various factors, such as interest rates, repayment terms, and screening criteria, in order to choose the loan that is right for you.
This article will explain the key points for choosing a mortgage loan in the U.S. and the social conditions that have been noteworthy in recent years.
Current Status of Mortgage Rates in the U.S.
As of October 2023, the U.S. mortgage rate is about 7.49% for a 30-year fixed rate, the highest level in about 23 years since December 2000. This is due to the impact of rising long-term interest rates.
Mortgage rates fluctuate depending on economic conditions and monetary policy in the U.S., so it is important to keep up-to-date with the latest information. Rising interest rates can lead to an increased burden on homebuyers, but on the other hand, postponing the purchase to wait for interest rates to fall can lead to further price increases.
Points to consider when choosing a mortgage loan
In addition to interest rates, the following points should be considered when choosing a mortgage
Loan type
Fixed Rate: The interest rate is fixed for the term of the contract. This type of loan is recommended for those who wish to make systematic repayments, as it is not affected by interest rate fluctuations and the amount of monthly repayments is stable.
Floating rate: Interest rates are reviewed periodically. While low interest rates reduce the repayment burden, there is also the risk of interest rate hikes. Recommended for those who are sensitive to short-term interest rate trends.
Repayment period
Generally, 15, 20, and 30 years are available.
The longer the repayment period, the lower the monthly repayment amount, but the higher the total repayment amount.
Choose a repayment term that is reasonable for your income and life plan.
Down payment
Generally, about 20% of the home price is required.
The larger the down payment, the less you will borrow and the lower your interest rate burden will be.
If your down payment is small, you will need to purchase mortgage insurance, which will cost more.
Lending institution
A variety of financial institutions offer mortgage loans, including banks, credit unions, and companies specializing in mortgage loans.
Compare interest rates, fees, and screening criteria, and choose the financial institution that best suits your needs.
U.S. Mortgage Loan Screening Criteria
The U.S. mortgage loan approval criteria are based on a comprehensive evaluation of the following factors.
Credit score
n index calculated based on past debt repayment history and other factors. The higher the credit score, the lower the interest rate.
Income
A stable income is required.
Down Payment
The larger the down payment, the easier it is to qualify for a loan.
Debt
You should have low non-mortgage debt.
Length of employment
Longevity of employment at your current place of employment is highly valued.
Outlook of housing market and interest rate trends after 2024
he U.S. housing market is expected to remain flat to rise moderately after 2024 due to the following factors.
Insufficient housing supply
Housing supply is in short supply due to population growth and concentration in urban areas.
Rising construction costs
Rising labor and material prices are driving up construction costs.
Interest rate trends
Interest rates are expected to rise gradually, but a sharp increase is unlikely.
Summary
A mortgage loan in the U.S. must be selected based on a variety of factors, including interest rate, repayment period, down payment, and lending institution. In addition, screening criteria are strict, so it is important to be well prepared in advance.
The housing market is expected to remain flat to rise moderately in 2024 and beyond, but interest rate trends should be watched carefully. If you are considering purchasing a home, start gathering information as early as possible and choose the mortgage loan that is right for you.
