You have probably heard that mortgage rates are on the rise, which is slowing things down in the market and giving more and more buyers pause as they consider those higher rates. But even as rates trend higher – hovering around six percent as of this writing – they are still favoring the home buyer segment in some ways. Here’s why.
In a nutshell, while your goal is always to get as low a mortgage rate as you can to get a smaller monthly payment, it’s never a bad time to buy if you can afford the home you’re looking at, says The Mortgage Reports. Buying a home should be more about the state of your personal finances than the state of the market.
Still, the higher rates are scaring off some buyers as they realize they can afford less house when factoring in the higher interest rate. You may think this will open up inventory so you as an eager buyer can have more to choose from. This may be so, but don’t mistake slowing price growth for falling prices. Experts says to expect rising housing values as we head into the last part of 2022, but just at a slower pace.
The silver lining of rising rates is that properties are sitting on the market for longer periods of time, so the frenzy to put in a high and fast offer on the first weekend isn’t as pervasive. As a buyer, you may be able to take your time on certain properties, offer a tad less, and not rush too quickly into a decision.
The Flip Side
That being said, there are some downsides to the rising interest rates for buyers:
- You may qualify for a lower loan amount. The pre-approval amount you get from your lender will depend on the down payment and monthly payment you are able to afford based on your debt-to-income ratio (DTI). Due to the fact that your monthly payment will be higher, you won’t qualify for as high of a loan as you would have with the rock bottom interest rates of last year. This affects first-time buyers especially, as they do not have the proceeds from a sale of a previous home to offset that lower mortgage amount and higher down payment.
- It will be tougher to find homes in your price range. As rates trend upward, sellers may start to lower their asking price if they don’t get the offers they want, but this doesn’t happen overnight. There’s still not enough inventory out there, and this growth could keep prices elevated for now.
- Higher rates equal higher mortgage payments. Now you have to consider a lower home amount due to the higher mortgage amount you would have to pay. Basically, you can afford less house now due to the higher payments.
In the end, the rising rates don’t spell all doom and gloom for buyers across the board. However, it’s helpful as you begin your search to connect with a buyer agent who can help you navigate this tricky time in the real estate market.
Contact Berkshire Hathaway Premier Properties for Home Buying Help
Even with mortgage rates on the rise, it’s still a great time to buy a home. Partner with one of our agents today when you contact Berkshire Hathaway Premier Properties at 713-862-0000.