What Can LGBTQ+ Couples Expect in Home Buying?
Everyone knows mortgage rates have been rising dramatically, higher today than at any point in 2020 and 2021. But did you know rates may have peaked in June of this year?
The housing market is a complex mechanism, and there is often no simple answer as to whether it’s the right time for you to buy a home. Let’s take a look at what’s happening in the market and why there might be advantages to house hunting in the last quarter of 2022 and on into 2023.
A Cooling Market
Over the last few years, record-low mortgage rates resulted in a booming housing market. Then came inflation, spurred by global supply chain issues, surging demand, the pandemic, and even government relief checks. Too much money chasing too few goods always leads to price increases.
But what does that have to do with your search for a home? With the Consumer Price Index up by 8.5%, the Federal Reserve stepped in to get inflation under control. The biggest tool the Fed has for this is to raise the federal funds target rate; that’s the rate at which commercial banks borrow and lend their excess reserves to one another. As soon as money costs more for banks, it costs more for all of us, and especially home buyers.
As the theory goes, if it costs more to borrow money, then spending will slow down, demand will ease, and inflation will fall back to acceptable levels (around 2% or so).
But are today’s higher mortgage rates really bad for home buyers?
The Downside of a Boom Market
Are today’s higher mortgage rates really bad news for home buyers?
For the first time ever, in July 2020, the 30-year fixed rate fell below 3%. The trend continued, bringing mortgage rates to a new record low in 2021 of just 2.65%.
It seemed like the best time ever to buy a new home, and many people agreed, perhaps too many. Those who tried to buy a home during the boom noticed strange things beginning to take place. Competition was so fierce, houses often sold immediately, and sold to buyers with cash in hand. While interest rates were low, homes often sold for much higher than the asking price. Home sales turned into auctions.
In the fevered environment of the low interest boom, many buyers not only piled on the cash, but they also waived the home inspection contingency too. Anything to close the deal and quickly and snap up that great “bargain.” Of course, in the excitement of a hot market, many home buyers made irrational decisions that, in the end, will cost them far more than a low interest rate can save.
The lesson: the housing market boom of the last couple of years offered advantages and disadvantages, but now that it is over, your opportunity to find the home of your dreams is still alive.
Are Rising Interest Rate So Bad?
While mortgage rates vary depending on your credit history, your location, and the down payment you’ve put together, in August of 2022, average rate stands at 5.91% for a 30-year fixed mortgage and 5.14% for a 15-year mortgage. How does this compare historically?
In October of 1981, 30-year mortgages hit at all-time high of 18.45%. As recently as 2008, rates were still above 6%, and above 5% in 2010. So, rates are bucking the historical trend of the last 40 years but remain well below the double digits of the 80s and early 90s.
As rates rise, home buying is slowing down. It’s not just that fewer sales are made, but in the cooling market the irrational “auction” behavior is also subsiding. Now, you have the time to give each potential home purchase the careful consideration it deserves.
You may even find that sellers with an urgency to make a sale (moving, divorce, estate sales) may come down from the asking price to make a deal.
And finally, projections by The Federal National Mortgage Association (Fannie Mae), show 30-year fixed mortgages falling to an average 4.5% in 2023. So, the best time to buy a home may be over the months ahead, as rates begin to decrease, and more reasonable home buying behavior holds sway.
Buying as an LGBTQ+ Couple
All legally married couples, including LGBTQ couples, may title their home under “tenancy by the entirety.” This protects both spouses from creditor actions and ensures that property passes without going through probate.” This is true unless the creditor is the IRS, or where both owners owe the debt as a couple.
LGBTQ+ couples who are not legally married can still purchase a home together. However, jointly owned property may not pass to your spouse unless you have an estate plan in place.
Unmarried LGBTQ+ couples should work with their attorney to prepare a favorable legal foundation when making a home purchase.
Solid Financing is More Important than Ever
When planning for home ownership, it’s important for LGBTQ+ couples to:
- Improve credit scores
- Save for a down payment
- Check your debt-to-income ratio (DTI)
- Get a mortgage pre-approval
In addition to banks and traditional mortgage lenders, you may be able to explore other options. FHA loans are insured by the Federal Housing Administration. Veterans, qualified servicemembers, and spouses may be eligible to buy a home with help from a VA Loan. Both FHA and VA loans are accessible (in some circumstances) with credit scores as low as 580.
Even if this is your second home buying experience, you’ll find solid information in our “First Time Homebuyer Guide.” This 40+ page guide delivers a range of critical information from Understanding the Mortgage Process and Types of Loans to Avoiding Discrimination and which states have no LGBTDQ+ Housing Protections.
Find the Help You Need
The LGBTQ+ Real Estate Alliance, a 501(c)6 organization, was launched in June 2020 by leading members of the real estate industry. The mission of the Alliance is to Advocate, Elevate, and Celebrate. The Alliance advocates for fair housing for all and promotes LGBTQ+ homeownership.