Are You Ready for Rising Interest Rates?

“I want to purchase a home, but how can I deal with higher interest rates?” Many clients have reached out to ask me this question recently. Mortgage rates have increased, and they’re likely to rise further throughout the year. Rates are still low historically, but there’s no denying that recent increases make it more difficult to purchase a home. If you’re looking to buy, what can you do? Fortunately, there are tons of creative ways to adjust your strategy and prepare for higher rates, and I want to share three of them with you today:

1. Improve your credit. You may think your credit score is already as good as it can be, but there is always room for improvement. Start by paying off your debt little by little. This will lower your debt-to-income ratio, which is what lenders use to determine your creditworthiness. You can also save up for a bigger down payment to improve your credit and lower your rate. The results may seem small, but even a tiny difference can add up to a huge amount over the course of a loan. If you need a great lender to help you improve your credit, just reach out to me.
2. Lock in your mortgage rate when it makes sense. If your lender is offering you a good rate, consider locking it in. Rates are expected to continue rising to combat inflation, but you won’t have to worry about that if your rate is locked in. Just remember that it only makes sense to lock in your rate when you’re almost to closing. Most rates only stay locked in for one to two months. 
3. Pay mortgage points at closing. Also known as “discount points,” mortgage points are fees you can pay to lower your interest rate. One point typically costs 1% of your loan, so a point on a $200,000 mortgage would cost $2,000. A nice perk of mortgage points is that they might be tax-deductible. If you can deduct your mortgage interest, chances are you can deduct the cost of your mortgage points as well. 

There are still plenty of opportunities in our market. If you have any questions about interest rates or purchasing a home, please call or email me. I am always willing to help!