As a first-time homebuyer, it can be overwhelming to consider buying your first home when mortgage interest rates are high. With the current state of the economy, mortgage rates have been on the rise, making it difficult for first-time homebuyers to take the plunge. As of right now in December 2022, rates have been trending down for a month, but overall are still higher than a year ago.
However, while it may seem daunting, there are still ample opportunities to purchase your first home even when rates are high. The key is to know what you’re looking for and how to be strategic about your purchase. When it’s time to start looking for ways to take advantage of the current market. Here are a few tips to help you get started:
1. Look for Government Programs: There are a variety of government programs that can help first-time homebuyers with their purchase, even when rates are high. Programs such as FHA, VA, HomeReady, and Home Possible loans can provide more flexible lending guidelines and potentially lower interest rates.
2. Consider Adjustable-Rate Mortgages, temporary interest rate buydowns, or permanent interest rate buydowns on a fixed rate loan: There are many greats option for first-time homebuyers, as it allows them to make smaller monthly payments while they get used to the new homeownership responsibilities. Temporary interest rate buydowns, in particular, pair a fixed rate mortgage (the exact payments for 30 years are scheduled ahead of time, there are no unknowns), with a lower introductory payment that can create a furniture or home renovation budget. Just be sure to look at the terms of the loan and consider how the payment will adjust over time, do not “get used to” the introductory interest rate. Click here to schedule a free consultation.
3. Get Pre-Approved: A pre-approval is a great way to get an idea of how much you can afford and what type of loan you are eligible for. This is especially important when rates are high, as it will help you better understand the impact of the higher rate on your monthly payment. We do not charge for preapprovals. Click here to start your free preapproval to find your buying power, and don’t forget to opt-out of your information being sold to 3rd parties by Experion, Equifax, and TransUnion (we do not sell your information, but you have to opt out of them selling your information).
4. Consider the Long-Term: Although it may seem counterintuitive, purchasing a home when rates are high can be beneficial in the long run. This is because the higher rate may mean you pay a lower price, and thus borrow less, which you may be able to refinance later if and when both inflation and mortgage rates drop (inflation and rates tend to go up, and down, together). Real estate tends to go up over the 5 to 10 year span of time, even when there are short term drops in price, that can be to your benefit as a homebuyer. Robert Shiller is a Nobel Prize recipient, here is his famous home price index, as of today:
Buying a home when rates are high can be intimidating, but it doesn’t have to be. By doing your research, working with a local in-state expert, and being strategic about your purchase, you can take advantage of the current market and find the perfect home for you.