With interest rates on the rise and more increases likely on the horizon – is now still a good time to buy a home? In terms of the rate, I say “yes” because purchasing a home means you are NOT renting anymore and you are building equity into your own home versus your landlords.
For homebuyers concerned about rising interest rates, the rates have been mostly below 5 percent since late 2009, however, they were above 7 percent most of the time from 1971 to 2001, rising to over 18 percent in late 1981. Rates did not dip regularly below 6 percent until 2008.
This entire generation of homebuyers are used to never seeing a rate above 5 percent!
I think that the rates will be more volatile going forward, though can’t see huge increases as were seen in the past. This means that a home mortgage will still be a good deal for most homebuyers this year. Let’s say you can get a mortgage interest rate at 4 or 5 percent, compare that to your credit cards, where interest rates are usually near 20 percent, the mortgage rate isn’t looking too bad.
The effect of higher rates is often felt most by those who are stretching their budgets to buy or those who have other debt and are struggling to qualify for a loan.
A more expensive home obviously means bigger payments. One of the simplest ways to lower your payments is to choose a less expensive home, even if it means giving up some of the features you want.
Here are a few factors that can have more impact on your mortgage payment than interest rates:
Credit score. How good is your credit score? Bottom line is those with higher scores get better rates, and you need a score of at least 650-680 or higher to ensure you will get the best rate from most lenders. If you’re not at that level, you may want to start making improvements to your credit in order to boost your credit score.
Down payment. If you are purchasing a home for your own use the minimum down payment is 5% of the purchase price (even if this is the 5th home you have bought). If you want to avoid paying high-ratio mortgage insurance which protects the lender if you default, you need to put a minimum of 20 percent down to buy a home with all “prime” lenders. The bigger the down payment, the lower your payments are as you are financing a smaller amount.
If you aren’t able to afford the home of your dreams right now and have to settle for something less expensive, you may want to consider a ‘Purchase Plus Improvement’ mortgage which allows you to add a little extra money to do some upgrades to the home such as adding a garage, installing new flooring or adding granite kitchen countertops. The options are endless.
To further discuss the above to see what you can qualify for, contact an experienced Mortgage Professional. Jackie Woodward, former banker turned Mortgage Broker has over 35 years of experience. Contact her today for #expertadvice! Call 780-433-8412 or email: firstname.lastname@example.org Follow on Facebook, Twitter or follow her blog for her weekly posts.