13 Feb The Interest Rates Are Slowly Rising, Is it Still a Good Time to Buy?
With interest rates on the rise – and more increases likely on the horizon – is now still a good time to buy a home?
“In terms of the rate, yes,” says Nela Richardson, chief economist for the national real estate brokerage Redfin. That’s so low relative to historical averages.”
Interest rates have been mostly below 5 percent since late 2009. The idea of paying 12 percent interest on a home mortgage sounds preposterous, but rates were above 7 percent most of the time from 1971 to 2001, rising to 18.16 in October 1981, according to Freddie Mac. Rates did not dip regularly below 6 percent until 2008.
A small change in rates often means a small change in mortgage payments. For a $200,000 mortgage with a 30-year fixed rate at 4 percent interest, the monthly payment would be $954.83. At 4.5 percent, the payment goes to $1,013.37, and at 5 percent you would pay $1,073.64. Just for comparison’s sake, at 12 percent, the payment would jump to $2,057.23.
The effect of higher rates is often felt most by those who are stretching their budgets to buy or those who have other debt and are struggling to qualify for a loan. Rising home prices could have a greater impact. The median home sale price rose 5.5 percent last year, and Redfin predicts a 5.3 percent increase in home prices this year.
No one has a crystal ball, but the chances are are good that that 2018’s mortgage rates will continue to rise.
Here are five factors that can have more impact on your mortgage payment than interest rates.
Credit score. How good is your credit score? Those with higher scores get better rates, and you need a score of at least 740 to get the best rate from most lenders. If you’re not at that level, you may want to start making improvements to boost your credit score.
Down payment. You don’t need to put 20 percent down to buy a home, but if you do, you won’t have to pay private mortgage insurance, which protects the lender if you default. That can add $30 to $70 for every $100,000 borrowed to your monthly payment, according to Freddie Mac. Anchor Mortgage offers 80/10/10 piggyback loans, which allow you to get an 80 percent first mortgage and a 10 percent second mortgage, with no PMI required. Then you would pay 10 percent down. A bigger down payment also makes your payment lower because you are financing a smaller amount.
Points. You can pay cash upfront, called points, to lower your mortgage rates. It’s important to do the math for your situation to determine whether that makes financial sense, but it can for many homebuyers.
Closing costs. Not all lenders and not all closing agents charge the same amount. Shop around for the best deal on closing costs. Many fees are negotiable, and they can vary significantly depending on where you’re buying your next home.
Home price. A more expensive home obviously means bigger payments. One of the simplest ways to lower your payments is to choose a less expensive home, even if it means giving up some of the features you want.
If you are interested in learning more about qualifying for a home loan today please contact Dante at Anchor Mortgage at 843-367-9900, Dante@anchormortgagellc.com, or fill out the form below. We approve over the phone or in person. We are open late and on the weekends.