Alaska Mortgage & Refinancing

Last Updated on September 17, 2020 by Andrew Lee

Alaska, the biggest state in the country in terms of space, boasts of 50 different natural parks, volcanoes, glaciers, waterfalls, and even hot springs and beaches. All these natural beauties, combined with the state’s no sales tax law and its relatively affordable cost of living, make it an ideal place to live in.

Some of its top-ranking cities include the capital Juneau, as well as Fairbanks and Anchorage. However, only 63.4% of all homes in the state are owned, with the median home price sitting at $250,000. (Source: Livability.com)

Buying a Home: Now or Later?

In 2014, the average mortgage rates in The Last Frontier was on par with the country’s median, both at 4.13%. In 2015, it dropped to 3.85%, just a little lower than the national average of 3.88%. The release of the Alaska Housing Finance Corporation (AHFC) housing indicators report in 2016 showed that home loan lending in the state stabilized, resulting in the average rate also following suit. However, experts believe that this year, rates will go up again, but in a slow manner.

Homebuyers can take advantage of this opportunity while the rates are still low and the prices haven’t drastically gone up yet.

Home Prices and their Affordability

In AK, real estate costs more than the national average of $186,100. Here, single-family homes have an average value of $266,500 (Source: Zillow). These properties also consist of the majority of all residential dwellings, comprising 84.50% of the housing market. 10.80% comprise of condominiums, followed by the 3.90% share of townhomes. PUD homes make up the smallest portion, at only 0.80%.

Conforming Loan Limits

Throughout the country, the conforming loan limit is $417,000. However, since real estate is more expensive here, it has higher limits both for conforming loans and FHA loans. All counties in the state implement the standard limit of $625,000. The FHA limits vary from county to county though.

Consumers should also keep in mind that in most cases, they will receive a deed of trust rather than an actual home loan. For many lenders, this helps them avoid having to go to court in order to foreclose on a home.

Choosing between a Fixed- and Adjustable-Rate Mortgage

Borrowers in the state can choose between the two primary types of mortgages: the fixed- and the adjustable-rate mortgage. It’s important to understand the benefits and risks that come along with both of them.

Fixed-rate mortgages have the primary advantage of giving homeowners the assurance that they won’t see a shockingly high increase in their monthly payments. As the term suggests, these home loans feature locked-in rates. In short, the lender will apply the same interest throughout the entire life of the loan, from the first month until the completion of repayment.

Adjustable-rate mortgages, on the other hand, can have considerably lower interest rates in the first few months or years. In a well-performing market predicted to stabilize or even improve further, this type of housing loan opens doors of opportunities for borrowers to save a significant amount of money. Homeowners should keep in mind that there’s a risk of a large increase in its interest rate though, which can happen after the initial period.

Improving Credit Score Rating

One of the primary factors that impact mortgage rates is an applicant’s credit score rating. Lending institutions categorize borrowers’ scores from exceptional (800 or higher) to poor (579 and below). Those with poor FICO scores can have a difficult time qualifying for a mortgage, or even if they do, they will definitely have higher interest rates. (Source: Experian)

Thus, polishing one’s credit score can help immensely, as a few points can make a huge difference between loan approval and rejection.

References:

Alaska Housing Finance Corporation: https://www.ahfc.us/

USDA Rural Development Housing: http://www.rd.usda.gov/programs-services/single-family-housing-direct-home-loans/ak

Home Affordable Refinance Program: http://www.harp.gov/

Experian: http://www.experian.com/blogs/ask-experian/infographic-what-are-the-different-scoring-ranges/