There are several reasons why buying a home now, even with rising interest rates, can be a valid idea in this real estate climate.
It’s important to remember that interest rates are still historically low. While they may be increasing, they are still well below the levels we saw a over 2 decades ago. This means that even if you do have to pay a slightly higher interest rate on your mortgage, you will still be paying a relatively low overall cost for your home.
Buying a home can be a good financial investment. While it’s true that the value of a home can fluctuate over time, historically, real estate has appreciated in value. This means that, over the long term, the value of your home is likely to increase. This can provide a solid return on your investment, even if you do have to pay a higher interest rate.
Owning a home can provide a sense of stability and security. As a homeowner, you have the freedom to make changes and improvements to your home as you see fit. You also have the ability to build equity in your home, which can provide financial security in the future.
It’s important to consider the current market conditions. If you feel that you are in a good financial position to buy a home and that you will be able to afford the monthly mortgage payments, even with rising interest rates, then it may be a good time to take the plunge. Just be sure to do your due diligence and carefully consider all of your options before making a decision.
Whats the best way to position yourself to purchase your first home?
There are several things you can do to position yourself to be able to afford to buy a home:
Improve your credit score. Lenders often look at your credit score when determining whether to approve your mortgage application and what interest rate to offer you. A higher credit score can make it easier to qualify for a mortgage and can also help you get a better interest rate, which can make your monthly mortgage payments more affordable.
Save for a down payment. A down payment is the upfront payment you make when you buy a home. The larger your down payment, the less you will have to borrow and the more affordable your monthly mortgage payments will be. Start saving as soon as possible and aim for a down payment of at least 20% of the purchase price of the home.
Reduce your debt. High levels of debt can make it more difficult to qualify for a mortgage. Work on paying off your debt as much as possible before applying for a mortgage. This is also the best way to trade your debts for increased affordability while having the benefit of paying less interest and consolidating your would be debt into your home at mortgage level rates versus credit card level rates which are much higher in contrast. This might even grant you access into a different class of homes. $100 of monthly debt can approximately convert into almost $20K in affordability!
Shop around for a mortgage. Different lenders may offer different mortgage rates and terms, so it’s a good idea to shop around and compare offers from multiple lenders. Be sure to consider factors such as the interest rate, closing costs, and any fees associated with the mortgage.
Consider a mortgage with a lower interest rate. This goes without saying of course. A lower interest rate can make your monthly mortgage payments more affordable. There are several types of mortgages available, including fixed-rate and adjustable-rate mortgages. Consider the pros and cons of each type of mortgage and choose the one that best fits your needs. A good rule of thumb to remember is that the lowest rate is also not necessarily going to be the best mortgage package you should get as it may be more restrictive versus a conventional mortgage.
Consider purchasing a less expensive home. It’s tempting to take full advantage of the complete approval amount. If you are having trouble affording a home at the price point you are currently looking at, consider purchasing a less expensive home, will create a sweet point in your monthly carrying costs. This can help make your monthly mortgage payments more affordable and allow you to enter the housing market sooner rather than later as the longer you take to find your home, the one you just missed out on will eventually be more expensive then it was sold for.
Get pre-approved for a mortgage. This is one of the biggest reasons buyer’s fail to buy a home. Before you start looking for a home, it’s a good idea to get pre-approved for a mortgage. This can help you determine how much you can afford to borrow and can also make you a more competitive buyer when you are ready to make an offer on a home. Do you go shop not knowing what your credit card limit looks like? The same is applicable in your home search.
If you are still unsure whether you are able to make the jump into home ownership, you can feel confident in entrusting your real estate plans with us so we can show you the best way to make your dreams a reality. The truth of the matter is most people who haven’t attempted the process have no idea where to begin and that’s where we come in and show you what’s involved. It’s another thing we do to make it easy for you. Contact us today for a no-obligation discussion!