The mortgage rates have been rising and that has some homeowners wondering if
they missed the best time to buy. Not at all, say experts. That's because the
rates are still considered very low and the increase isn't sharp.
The rate for a 30-year fixed mortgage on June 25, 2013 was approximately 4.5
percent, climbing from its June 1, 2013 rate of approximately 3.9 percent. Based
on the higher interest rate, monthly payments on loans ranging from $100,000 to
$300,000 don't go up significantly.
Rick Allen, the chief operating officer at Mortgage Marvel breaks it down by
showing that a home that cost $100,000 at 3.9 percent would have a monthly
payment of $471.67. That same home price at 4.5 percent increases the monthly
payment by only $35.02. For a $200,000 home at 3.9 percent the monthly payment
is $943.34. If that same home's rate were 4.5 percent, then the monthly payment
would increase by $70.03. On a $300,000 home at 3.9 percent the increase in a
monthly payment, if the rate were 4.5 percent, is $105.06.
While the increases are, of course, monthly - it will add up over 12 months -
it's still quite possible for many buyers to manage. Allen suggests that if the
payment isn't manageable, the consumer could buy a less expensive home. There
would need to be only about a 7 percent reduction in the amount borrowed at 4.5
percent to return the payment to the same monthly payment as it would be at 3.9
percent.
Rising interest rates often cause people to act quickly and jump into the
housing market - which can start to increase home prices in tight inventory
markets as these potential buyers get more serious about homeownership.
If you're considering homeownership and wondering how the rise in interest
rates will impact you, consult with a mortgage broker. An expert in the field
can help you determine exactly how much home you can afford, at which rate, and
for how long you'll have to pay.
If homeownership is high on your list, start your due diligence now. Meet
with experienced real estate agents to decide who can help you the most. Buying
a home is a lengthy process and there is a lot to understand so you'll want to
make sure you're compatible with the agent. You'll also want to make sure you
have a clear picture of what you can afford, what you want in a home, and for
how long you want to own it.
Next, since you know that rates are rising, start preparing. If you know that
the home you wanted to buy was, for instance, in the $300,000 range but, due to
rising interest rates, your monthly payments would be higher, then look at your
finances and see where you can cut back now to save a little more. Saving now
will allow you to put more down on the home and reduce the amount of money you
need to borrow which, therefore, lowers your monthly payments.
I write this often but it is most important - do your research. Don't give up
on homeownership just because rates are rising. Instead, take a good look at
your finances with experts and understand what you can afford now and/or how
much you need to bring in to make your monthly payments manageable so you can
afford a home in the near future. Education and understanding will lead to a
more successful home-buying experience.
Written by Phoebe Chongchua
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