Driving down the road and seeing a Home for Sale sign on the perfect house can make you wonder if this is the year for you to buy a new home. But, you’ve heard about the recent interest rate hikes made by the Federal Reserve. And that can make you think about whether or not it really is a good time for you to purchase a home after all.
As a Realtor who puts up a lot of Home for Sale signs in communities like Queen Creek, San Tan Valley, and Apache Junction, I can tell you that the real estate market is still alive and well…and, that the impact of the Federal Reserve’s hikes may not have an immediate effect on you buying a home. Let me explain:
Yes, it is true that the Fed recently raised short-term interest rates. But, since mortgages are subject to long-term rates, the Fed’s increase will not likely have a large effect on mortgage rates right now. As future scheduled increases begin to take place, mortgage rates will begin to rise.
Here are a few things to consider if you are in the market for a new home:
- Adjusting your budget: Any increase in mortgage rates will be gradual, but this can result in a higher monthly mortgage payment. To stay within your monthly budget, you may need to lower the target price of the home you are looking for. This strategy is especially true if you are a first-time home buyer. If you are thinking of selling your current home, you may get a higher interest rate on a future mortgage than on your current one.
- Getting credit may be more difficult: When interest rates go up, getting credit is not as easy. When you apply for a mortgage, your debt-to-income ratio is evaluated, so you will want to be concerned with any short-term credit debt you have accumulated.
- Reducing your credit card debt: If you have large balances on high-interest credit cards, it is wise to start paying them down. When interest starts to go up, it can become harder to pay off your credit cards. And, when you pay down your credit card balances, it can help to improve your credit score, which is important when applying for a mortgage.
- Saving your money for a down payment: It goes without saying that the more money you have for a down payment on a house, the less you will have to borrow. But, it is worth saying because if you can save money for a larger down payment, then you will be paying interest on a smaller amount of money. You may even qualify for a lower interest payment, which can save you money in the long run.
So, if you just can’t stop looking at the homes behind the Home for Sale signs, let’s talk about how you might be able to make your home buying dreams in 2016 a reality. I’m Big Mike, and I’m here to help.