First Time Home Buyers

Several Ways to Buy a Home When Mortgage Rates Increase

Theres no doubt that we have seen very low interest rates for several years.  And there have been several talks about the feds raising interest rates in the future which will increase the mortgage rates. However, as mortgage rates increase, owning a home becomes more expensive and sales of homes typically decline.  Furthermore a higher interest rate mean your monthly mortgage payment will be higher for the most part, just how much depends on the hike in the interest rate and the size of your loan.  If you are looking to purchase a property and worried about rising rates, here are a few ways to protect yourself :

Act Quickly: Since mortgage rates are anticipated to rise, it is wise to accelerate your home buying plans. Get your cash ready to put down on a deposit and get a completely underwritten pre-approval for a mortgage. This will definitely help you lock in and protect your mortgage rate as soon as your offer is accepted.

Have a Great Credit Score: Borrowers with a credit score above 760 get the lowest interest rates on a conventional loan. Your mortgage rate will rise slightly with each 20-point drop in your score, so if you can pay off debt, pay your bills on time and fix any mistakes, you may be able to raise your score enough to lower your mortgage rate a little.  Either way, try to pay off your debt as soon as possible.

Put A Large Payment Down: You can use cash in one of two ways or both, to reduce your monthly payments. You can make a bigger down payment, which will reduce the amount you need to borrow so that’s obvious. But if  your down payment is 20 percent or more, you’ll also eliminate the need to pay private mortgage insurance. Cash can also be used to pay discount points at the closing, which are equal to 1 percent of your loan amount. Discount points buy down your interest rate for the life of the loan. If you are planning on staying in your home for many years, it may be a good thing because the longer the expected term, the more discount points might make sense. Therefore it will help in the long run.

It is extremely smart to protect yourself in a rising interest rate environment.  If you act quickly, increase your credit score, and put down a large payment, you stand a good chance of getting a great rate.  


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