Buying a home is a big enough challenge on its own.
Checking off your family’s requirements, finding a nice neighborhood, settling down in a good school district – add rising interest rates to the mix and you’re probably feeling pretty intimidated.
Don’t worry. These five tips will help you better understand high interest rates and bring you peace of mind as you search for your home sweet home.
Tip 1: Understand What Rising Rates Mean for Buyers
In April, interest rates on a 30-year mortgage were nearly 2% higher than they were a year ago. When interest rates are high, loans become more expensive, adding thousands of dollars to the cost of your home.
This increase discourages people from borrowing money due to higher monthly payments. Long-story short? As interest rates increase, affordability decreases.
(If this sounds daunting, the next few tips will help.)
Tip 2: Take the Time to Update Your Pre-Approval
Knowing what you can afford is an important step when searching for a future home. Unlike pre-qualification, pre-approval runs a hard credit check and gives lenders clarity on your financial standing. This process helps you hone in on your budget and monthly mortgage payments and gives you the green light to make an offer with confidence when you find a house you love.
Tip 3: Talk to Your Realtor About Adjusting Your Search Parameters
Once you’ve gotten pre-approved, you may need to adjust your search parameters. Perhaps you can now afford more home than you thought, or maybe higher rates require you to reign in your budget.
Either way, having an open and transparent conversation with your realtor helps them provide you with the best selection of houses for your specifications.
Tip 4: Don’t Panic – Historically, Interest Rates Are Still Low
The first tip confirmed it–interest rates are on the rise, but if you take a look back, they’re not as bad as you think. Historically, rates have gotten lower every decade. In 1971 rates hovered around 7.5%, in the late 1990s it dropped below 7% and then by the mid 2000s, they dropped below 6%.
All of this to say, while rates are definitely higher today, they’re still lower than years past. This broad outlook should give buyers like you the peace of mind to keep house-hunting.
Tip 5: Protect Yourself by Keeping Financial Contingencies in Your Offer
If you plan to put an offer in on a house, keeping financial contingencies in the mix can help you stay protected. Whether you’re banking on a clear home inspection or an appraisal at good value, this means that your offer is only valid should those terms be met.
Higher interest rates may be intimidating but they shouldn’t deter you from finding the right home for your family. Understanding their impact and leaning on your realtor’s expertise will help you move forward with confidence.
