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Rising Mortgage Rates: Should You Buy or Wait?

Published: February 13, 2019

If you've been watching the news recently, you're aware that the mortgage rates are rising. This may be concerning if you're getting ready or currently in the home buying process. It doesn't necessarily mean that you need to hurry up and lock in a decent rate before they continue to increase, but you should be aware of how it may impact your situation.

Housing Costs

The increase in housing costs means that the overall prices of homes will increase. When you're searching, it's important to pick a monthly payment that works for your budget. Once you have that, it will help you determine what your maximum price would be. Unfortunately, with the increase in interest rates and housing costs, that means you may not be able to afford your dream home anymore. As the interest rate increases, so does your monthly payment. Don't panic; there are ways that you can get the house of your dreams without having to settle.

If you can save up enough money for a decent down payment, plus the closing costs, you may be able to get a more expensive house for the same payment as a cheaper house because you won't need to finance as much. There's also the option to buy "points," which reduces the interest rate on the loan.

Expenses

After you buy a house, you need to make sure that you have money saved for any expenses that arise. Most people focus on paying the down payment and closing costs, but forget that you may need to replace carpets, paint, or there may be a repair that you didn't know about until after you move in. If you don't have any money saved up for those expenses, it can hurt you very quickly.

How long are you planning on staying in the home?

Make sure that before you begin the home buying process, you're aware of how long you want to stay in that home. If you have a higher interest rate on your home, it extends out how long it takes before you break even on the purchase. If you're not planning on staying in the home longer than a few years, maybe you should hold off. The average time to break even on a home purchase is around 5 or 6 years. 

There may come a point where the interest rates continue to increase and you may be in a situation where your pre-approval becomes a denial while you're in the home buying process. Don't panic though. It could just mean that you don't qualify for that specific loan anymore. If that's the case, just look elsewhere and see what other options you have. It doesn't necessarily mean that you will never be able to buy a house, but you may need to put more money down or go to a different lender.

Don't let the rising rates increase the pressure to buy a house. Make sure that you're getting a house that fits in your budget, but also the house that works for you. Waiting may result in a higher interest rate, but it may save you money in the long run because it's the house that fits your needs.