A Look at Interest Rates
Did you know that interest rates have started to slowly rise? Before you get concerned, we have some tips for you! If you can successfully navigate this time, you will not be priced out of your dream home.
Before you start your home search, check out these tips:
- Check your pre-approval amount because with the higher interest rate the amount you were approved for has changed. For example, you might have been pre-approved for a $200,000 loan in March, when the average rate was about 4%, but now that mortgage rates are above 5%, you might only be approved for only a $180,000 loan. This would be a good time to look at your pre-approval amount because you may have to make a slight adjustment to the price range of the homes you are looking to buy.
- Consider an interest rate lock program. A mortgage rate lock is an offer by a lender to guarantee the interest rate of your loan for a specified period of time. The lender may charge an extra fee or include the cost of the rate lock in the loan. The lock period usually extends from initial loan approval, through processing and underwriting, to loan closing. Some of these programs even offer the option to “float down” meaning if interest rates drop while you are searching, you can adjust to the lower rate.
- Do your homework by researching the types of interest rates that are available so you aren’t caught off guard with an interest rate that won’t work long term for you. As rates rise, it can be tempting to seek out loan options that seem to be a better deal upfront. You may have noticed that adjustable-rate mortgages usually offer a lower initial borrowing cost. While this may seem like a good deal at first, these types of mortgages can be a risky move if you plan on keeping the property for more than a few years. An adjustable-rate mortgage means that the interest rate on your loan will be fixed for a period of time, usually a few years. But after that, the interest rate will reset periodically, depending on the terms of your agreement. If interest rates are declining, this can save you money. But, if they increase, you will be subjected to increased mortgage payments.
The rise in interest rates doesn’t have to derail your plans for your dream home. With a little effort and research, you will be able to purchase the home of your dreams and be able to make the mortgage payments as well.
When you’re considering a mortgage, find a lender you can trust. There are a fair amount of lenders available, but if you want a recommendation, ask your realtor! They will have suggestions on lenders they’ve worked with in the past.
If a new home is something that you are considering, now would be the time to act so that the rates won’t catch you off guard. The agents at St. Augustine Realty are always available to be of help to you in your search.