Buying a home in Alaska
According to Zillow, the typical home value in Alaska is a little higher than the US national typical home value of $259,906. The typical home value in Alaska is $285,487, and Zillow expects the value to increase to $296,000 by September 2021.
First-time homebuyer programs in Alaska
The Alaska Housing Finance Corporation has several loan options for first-time borrowers statewide:
- First Home Limited: The AHFC offers a mortgage with a discounted interest rate to low-to-moderate earners, for certain property types.
- First Home: This type of mortgage is similar to First Home Limited, except there's no maximum income limit.
- My Home: If the type of property you're buying doesn't meet the standards of a First Home Limited or First Home mortgage, you may be eligible for a My Home loan.
- Closing Cost Assistance: You can receive a loan of up to 4% of your mortgage amount to put toward closing costs or a down payment.
Historic mortgage rates for Alaska
By looking at the average mortgage rates in Alaska since 2010, you can see trends for 30-year fixed mortgages, 15-year fixed mortgages, and 5/1 adjustable mortgages:
Seeing how today's rates compare to historic Alaska mortgage rates may help you decide whether you'd be getting a good deal by getting a mortgage or refinancing now.
30-year fixed rates
You'll pay a higher interest rate on a 30-year fixed mortgage than on a shorter-term fixed-rate mortgage. The 30-year fixed rates used to be higher than adjustable rates, but recently 30-year terms have been the better deal.
Monthly payments are relatively low for a 30-year term, because you're spreading payments out over a longer period of time than you would with a shorter term.
You'll ultimately pay more in interest with a 30-year term than you would for a 15-year mortgage, because a) the rate is higher, and b) you'll be paying interest for longer.
15-year fixed rates
You'll pay less on a 15-year mortgage than on a 30-year loan, for two reasons: 15-year fixed rates are lower, and you'll pay off the mortgage in half the time.
Your monthly payments will be higher than with a 30-year mortgage, though. You're squeezing the same loan principal into a shorter amount of time, so you'll pay more each month.
An adjustable-rate mortgage keeps your rate the same for the first few years, then changes it periodically. For example, a 5/1 ARM locks in your rate for the first five years, then your rate fluctuates once per year.
ARM rates are at historic lows right now, but a fixed-rate mortgage is still the better deal. The 30-year fixed rates are comparable to or lower than ARM rates. It could be in your best interest to lock in a low rate with a 30-year or 15-year fixed-rate mortgage rather than risk your rate increasing with an ARM.
If you're considering an ARM, you should still ask your lender about what your individual rates would be if you chose a fixed-rate versus adjustable-rate mortgage.
Refinancing your mortgage in Alaska
Rates are at historic lows right now, so it could be worth it to switch your current mortgage for one with a lower rate — especially if the new rate would be significantly lower.
You don't necessarily need to refinance with the same lender you used for your initial mortgage. A different company may offer you a better deal this time around. Shop around for a lender who will offer the lowest rate based on your credit score and debt-to-income ratio, and the one that charges relatively low fees.
How to get a low interest rate
Here are some tips for landing a good interest rate on your mortgage:
- Save for a down payment. With a conventional loan, you may be able to put down as little as 3%. But the higher your down payment, the lower your rate will likely be. Rates should stay low for a while, so you probably have time to save more.
- Increase your credit score. Many lenders require a minimum credit score of 620 to receive a mortgage. But the higher your score, the better your rate will be. To improve your credit score, be sure to pay all your bills on time. You can also pay down debts or let your credit age.
- Lower your debt-to-income ratio. Your DTI is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders want to see a DTI of 36% or less, but an even lower DTI can result in a better rate. To improve your DTI, pay down debts or consider opportunities to increase your income.
- Choose a USDA or VA loan. If you're eligible, you might consider a USDA loan (for low-to-moderate income borrowers buying in a rural area) or a VA loan (for military members and veterans). These mortgages typically come with lower interest rates than conventional or FHA loans. As an added bonus, you won't need a down payment.
Improving your financial situation and choosing the right type of mortgage for your needs can help you get the best interest rate possible.
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