As mortgage rates rise, demand slows; we are starting to see a more balanced market. This is a good thing. With a more balanced market, buyers have more negotiating power and time to make decisions. The process slows down a little and most people appreciate that.
- Understand Credit Scoring. The higher your score, the better interest rates you can expect. That fact never changes, no matter what’s going on in the market.
- Get Pre-Approved. Pre-approval is a must. Having a pre-approval is like having a head start in front of the competition.
- Budget Wisely. There is a difference between what you can qualify to borrow, and what you can comfortably afford to borrow. Be realistic on how much you can spend on housing each month. Remember to take into account insurance, taxes and routine maintenance.
- Consider an ARM. An adjustable rate mortgage offers a low initial rate over the first period of years, and then adjusts after that. A 5/1 ARM has an initial lower rate for 5 years, and then it adjusts to the current rate. Be sure to speak to your trusted lender to see if an adjustable rate mortgage is right for you.
- Consider a Higher Down Payment…if possible. Most mortgages, including FHA loans, require at least 3% or 3.5% down. And VA loans and USDA loans are available with 0% down payment. But if you can put 10%, 15%, or even 20% down, you might qualify for a conventional loan with low or no private mortgage insurance.
- Ask Your Lender about Discount Points. A discount point costs 1% of the home loan amount, and can lower interest rates by approximately 0.25%. If you plan to stay in your home for more than five years, it may be worth the up-front cost.
- Lock in Your Rate. The FED has stated that rates will most likely rise in the future. Ask your lender to lock in on the current rate to avoid paying more.
- Consider Your Options Carefully. The best thing about a balanced market is that buyers have a little more time and breathing room. As we see the inventory rise, that means there will be more choices. If you’re not seeing a home that suits your needs, you can wait for more homes to come on the market.
- Request Seller Concessions. So you’ve found the house you want, but it needs some repairs/updates or is priced at the top of your budget. You can ask for seller concessions at closing to be included in the contract. Help with closing costs or a flooring allowance are examples of buyer requests.
A Little Perspective
Remember, if you can get a 30-year mortgage rate at or below 6%, you’re paying less than most American homebuyers throughout history. That’s not a bad deal.
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