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This BLOG discusses how MSHDA Rates Increased in 2022 and what that means for you when purchasing your home.
MSHDA has increased the rates on its popular down payment assistance (DPA) loans. As of March 25, 2022, the rate for both the MI Home Loan and the MI 10K DPA has risen to 4.625% (APR 4.7315%). As we have seen since the first of the year, interest rates have been on the move, and that move is higher. With this announcement, MHSDA better aligns its interest rates with the market. MSHDA offers down payment assistance in conjunction with conventional, FHA and USDA Rural Development mortgages. MSHDA provides the same rate for all mortgage types associated with its MI Home Loan and its $7,500 down payment assistance and MI 10K DPA product offering a $10,000 down payment assistance."As of March 25, 2022, the rate for both the MI Home Loan and the MI 10K DPA has risen to 4.625% (APR 4.7315%)." Click To Tweet
What is driving the increase in interest rates?
Supply Chain Issues:
As we have seen since the re-opening after the COVID lockdowns, supply chains were directly impacted, creating supply and demand issues. When supply is limited while demand is strong, it usually creates inflation of prices. Over 2020 and 2021, we saw a strong economy with rising prices that put pressure on interest rates. The Federal Reserve characterized the inflation picture over that 18 month period as transitory. But in 2022, we have seen the Federal Reserve state that inflation is no longer classified as transitory, meaning these prices may be more entrenched. This started a bit of a rise in rates at the beginning of the year.
War in Ukraine:
The events in Europe with the invasion of Ukraine have further disrupted important commodity markets, creating more inflation. We are seeing higher interest rates as the Interest rate environment is most negatively impacted by inflation. Recent announcements by The Fed assures that they will be raising their interest rates at each meeting into 2023, which has also put pressure on the mortgage interest rates offered.
How does this impact the real estate market?
Although interest rates increased to a level higher than what we saw in 2020 and 2021, the current rates are still below the average we have seen over the past 10 to 20 years. Higher interest rates and home prices have impacted housing affordability. However, with rents accelerating faster than home prices in most markets, home affordability is still in decent shape. Another critical point has been historically inventory levels, which have impacted the current real estate market. There are not many homes for sale today compared to the number of buyers looking to purchase. So real estate continues to show strong sales price growth." Although interest rates are certainly higher than we saw in 2020 and 2021, the current rates are still below the average we have seen over the past 10 to 20 years" Click To Tweet
MSHDA offers products that allow buyers to buy a home with as little as 1% of the sales price. This program has been around for decades and has helped thousands of Michigan home buyers. Saving for a down payment can be difficult, and the MSHDA down payment assistance programs make this part of the home buying process a bit easier. The idea of waiting until you have saved a down payment is not necessarily a requirement when purchasing a home when utilizing the MSHDA down payment assistance programs.
Let’s recap a couple of main points. Rates are rising across the board, a necessary evil to battle inflation. The “Why” is because:
- Inflation (as we already stated)
- A growing economy coupled with supply chain issues
- The unfortunate situation with the war in Ukraine
On a positive note, the rates are still hovering at historically low levels, and programs like MSHDA give home buyers assistance if needed. If you have questions on these great programs offered by MSHDA, please reach out by calling me or click here to apply with our mobile app for a free mortgage pre-approval.
Learn more about how you can get up to $10,000 in down payment assistance when purchasing your next home.