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There are many factors to keep track of when you’re buying a home in the Heart of Dixie—which is why homebuyers pay close attention to mortgage rates in Alabama.
Your mortgage rate, otherwise known as the interest rate, is a critical part of your loan agreement.
A homebuyer will almost always pay interest as part of their monthly payments on top of the principal home loan amount they’ve borrowed.
A tenth of a percentage point up or down could mean the difference in paying or saving thousands of dollars, whether you’re a home buyer or looking to refinance.
In that case, what is happening with mortgage rates in Alabama these days?
Where to find mortgage rates, trends, and insights
In researching mortgage rates, you’ll likely see many reports and articles that claim expertise in lending rates.
But who are the most influential and accurate monitors and forecasters of Alabama mortgage rates?
Freddie Mac is one of the most important enterprises contributing to the overall housing economy. They release a weekly survey of mortgage rates based on borrower applications from lenders across America.
Different types of lenders, mortgage lending companies, commercial banks, and credit unions are sampled to help create a more accurate snapshot of the housing market.
Surveys are based on conforming first-lien prime conventional “home purchase mortgages” with a loan-to-value (LTV) of 80%.
While not every application for a mortgage loan is forwarded to them, the wide range of data from the applications they do collect contains an objective and proportional sampling of the mortgage business nationwide.
This technique enables real estate professionals like us to get a direct and up-to-date reading on the current state of mortgage rates in Alabama and overall loan programs.
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Current mortgage rates in Alabama
The mid-January report from Freddie Mac shows that mortgage rates have now resumed their decline, which is good news for the real estate market in general.
Purchase demand, it states, is experiencing “large swings” in relation to any small changes in rates.
The last few weeks have seen latent demand appear, with buyers “jumping in and out of the market” as interest rates fluctuate.
As of Jan. 12, 2023, the mortgage rate for a 30-year fixed-rate mortgage was 6.33%, which made a four-week average of 6.38%.
The 15-year fixed rate mortgage was 5.52% and had a four-week average of 5.66%.
Both major mortgage rates had an almost unbroken downward trend since Nov. 10, when the rates reached their 2022 peak at 7.08% and 6.38%, respectively.
An expert weighs in about future rates
One of the biggest names in mortgage rates and the overall real estate market is Nadia Evangelou, Senior Economist & Director of Forecasting at the National Association of Realtors (NAR).
Her main focus is on regional and local real estate market trends, including the changes in demographic and migration patterns and their effects.
In a recent interview, Evangelou gave a quick but frank summation of last year’s market, which saw “affordability fall to record lows due to rising mortgage rates.”
“The beginning of the new year usually allows people to start all over again, as with resolutions, and one of [ways to change] might be to purchase a home. There is a lot of uncertainty and speculation around where the housing market is heading.”
Positive signs from the Alabama labor market and inflation trends
Evangelou pointed out that the labor market has shown increased job gains since the low point of the pandemic—with a December 2022 unemployment rate of 3.5%.
“There are actually more jobs now than back in March 2020,” they noted.
Alabama itself has seen the number of payroll job additions increase by 1.1% compared to pre-pandemic levels.
As to how that affects the housing market, Evangelou explains that “as more people enter back into the workplace, we expect the demand for housing to remain strong.”
What about inflation?
“Inflation,” Evangelou reported, “is finally starting to move down.”
As a result, the Federal Reserve has already switched to lower increases in interest rates compared to the jumbo hikes we’ve seen over the 2022 summer.
From the 20-year peak on Nov. 10, “if inflation continues to slow down, [interest] rates may stabilize below 6%—we expect about 5.7% [by the end of] 2023.”
Evangelou acknowledges that these rates don’t compare well with the 3% range we saw last year but are well below the historical average high of 8%.
Calculate mortgage payments with our mortgage calculator
Although the mortgage interest rate is a significant portion of your calculations for when to buy a home, it’s not the only factor to consider.
Calculating your potential monthly mortgage payment will include:
- Loan term
- Your monthly expenses
- Property taxes and fees percentage
- The down payment percentage
- Interest rate percentage
- Property insurance percentage
- The purchase price or home price
- And your monthly income
Using a mortgage calculator—or affordability calculator—can simplify this equation greatly, giving you the advantage of a good starting point to consider what you can afford.
A more exact and careful assessment through preapproval
Yes, a mortgage calculator does give you the simplest outlook of your homebuying abilities—but to get one of the most accurate assessments of your options, you need to choose to get a prequalification or preapproval done.
Especially if you are a first-time homebuyer, reaching out to a loan officer enables you to get a much more detailed examination of the following:
- The loan type would work best for you (e.g., FHA loans, VA loans, USDA, 5-year ARMs, etc.)
- What advantages your credit score could offer you
- Closing costs and how to handle them
- Insurance premiums and mortgage insurance
- Mortgage resources for down payment assistance through government groups like the Alabama Housing Finance Authority
- How to find the lower interest rates or refinance rates available
Get started with a conversation with Homefinity
Buying or refinancing a home can always benefit from expert advice and guidance.
Reach out to one of Homefinity’s experienced and passionate loan officers.
We’ll review your financial situation and offer the best purchase or refinance options for your Alabama dream home.
Pre-approval is based on a preliminary review of credit information provided to Fairway Independent Mortgage Corporation, which has not been reviewed by underwriting. If you have submitted verifying documentation, you have done so voluntarily. Final loan approval is subject to a full underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, income information, and a satisfactory appraisal.
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