By David Wilfong
QUESTION: What should potential home buyers be keeping in mind now that interest rates are climbing?
Buying a house continues to be a great way to build long-term wealth and ensure that you have a stable place to call home. Unfortunately, over the past couple of years, purchasing a home has become incredibly competitive, and many buyers find themselves unable to get a home under contract. Over the past few months, mortgage rates have continued to steadily increase, which creates additional problems. For those wondering, “Should I buy a home with rising interest rates?” there are various tips and factors to consider.
Reconsider Budget: One of the most important factors to consider when buying a home in a rising interest rate environment is to reconsider your budget. Your mortgage payment is likely the largest expense that you will have. Today, due to higher rates, you can expect a mortgage payment to be about 15% higher than it would have been just a year ago for the same-size loan.
To offset this, you may need to either purchase a lower-priced home, put forth a larger down payment, or find other ways you can cut back on spending. You could also consider paying more points at closing or choosing an ARM loan, both of which will provide you with a lower monthly payment for a period of time.
Lock-in Rates: You should also consider locking in your interest rates when you find a home that you want to buy. If you are able to enter into a contract, you should work with a mortgage lender immediately to have an interest rate locked in. Waiting even a week to lock in a rate could mean having to pay a higher rate for up to 30 years. If rates do drop while you are going through the application process, you may be able to get your lender to lower the rates.
Do Not Panic: While there is an incredible amount of competition in the housing market for buyers right now, it is important that you remain calm and do not make a hasty decision. Buying a home is a major decision, and you will want to be happy with your home and location. If you are not able to find a home that you like and that works for your life, you will likely need to move again in the future. This could end up costing you more in the long run, even if mortgage rates rise further.
Rising mortgage interest rates continue to pose a new challenge for home buyers. While buying a home with rising interest rates can seem stressful, there are tips that you can follow that can ensure you make a smart purchase decision. This can help ensure you get into a great home with an affordable monthly payment.
Ashley Baker, www.updwell.com, (801) 784-9100