With the market the way it is (high prices and high interest rates). What can you do as a buyer? In terms of prices, you can wait and hope, they eventually go down. But what about these interest rates?
Did you know there are methods to lower you rate, that you can take advantage in any market, not just this one. In this post, I will go into detail about each.
If you have money in the bank, the more you put down, the less your mortgage payment will be. One of the reasons for that, is because you will be paying less interest.
The magic number has always been 20% down, but if you can put more, go for it. 20% is the magic number, because anything less, and most banks require you to pay PMI (mortgage insurance), which will also increase your monthly payment.
Another strategy would be to pick a shorter term loan. Yes your monthly payment would be higher, but you would be paying less interest. So if you could afford it, pick a 15 year loan instead of the traditional 30 year.
Or go with the 30 year loan, but pay it off sooner by making additional principal payments. Remember the key to paying less interest is to pay off the loan as quick as possible.
So you shop around for everything else, why not do the same when it comes to a mortgage. Not everyone offers the same, so find a mortgage company, that would benefit you the most.
Use a mortgage calculator to compare different loan options. First you need to find one that is user friendly. Then enter the required information like loan amount and length. Using a calculator can help you decide, which loan option is best for you.
A government backed loan could help you with buying a home. Although it wouldn't help with interest rates, these loans could help qualify people, who normally wouldn't. For starters you down payment would be less, and although you would still need to pay mortgage insurance, the federal government lowered their rates this past March.
Lastly, you have the option to get a variable rate instead of fixed. When you interest rates are low, you are always advised to get the rate fixed, but why not go the opposite in a market with high rates.
A variable rate will move when rates move, so it can go up or down depending on the movement. If you're afraid the rates will continue to go up, then stick with a fixed rate. You always have the option to refinance if rates go down.
Well I hoped this helped you to not be afraid to be a buyer in this market. When things change for better or worst, it is up to us to adapt to that change.
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