Here are the top 5 ways home buyers can combat high interest rates
The Federal Reserve just raised interest rates by a quarter percentage point Wednesday. What does that mean for mortgage rates?
Federal funds rates don’t really impact mortgage rates, which depend largely on the 10-year Treasury yield. With the 10-year Treasury yield falling from its highest levels in recent months, mortgage rates have fallen with them. on January 27th, interest rates on a 30 year fixed mortgage were 6.119%. Today, February 2nd, that same rate is 5.898.
What does all that mean? Mortgage rates are still high compared to last year. So, while the financial gods play with interest rates to curb spending and bring down inflation, what can we, mere mortals, do to offset higher mortgage rates if we need to buy a new home?
Improve credit score:
A higher credit score can result in better interest rates and lower monthly payments.
Make a larger down payment:
Putting more money down on a home can reduce the amount borrowed and thus lower the interest rate.
Shop around for mortgage lenders:
Different lenders can offer varying interest rates, so it is important to compare offers from multiple lenders.
Consider adjustable-rate mortgages (ARMs):
ARMs may offer lower initial interest rates that can adjust over time, even if the Fed raises rates.
Look into government-sponsored loan programs:
Programs like VA loans, FHA loans, and USDA loans can offer lower interest rates to eligible home buyers, regardless of changes in the Fed’s interest rate policy.
Lock in an interest rate:
If a home-buyer has found a low interest rate, they can ask their lender to lock it in, which means the interest rate will remain the same even if the Fed raises rates.
It’s important to keep in mind that these options may not be suitable for everyone and it’s recommended to consult a financial advisor before making any major financial decisions.
If your still unsure about the market conditions or steps you can take, contact me and I will introduce you to reputable lenders I work with.