Buyers: In today’s market, it doesn’t pay to draw out your home purchase.
Rates are still historically low, but there’s no denying that recent increases make it more difficult to purchase a home. If you’re in the market to buy, what can you do? Here are three creative strategies that can help you get a great rate:
1. Improve your credit score. You may think that your credit score is already as good as it can get, but there’s always room for improvement. Start by paying off your debt little by little; this will lower your debt-to-income ratio, which lenders use to determine your creditworthiness. You can also save up for a bigger down payment to improve your credit and lower your rate. The results may seem small, but even a tiny difference can add up to a huge amount over the course of your loan.
2. Lock in your mortgage rate. If your lender offers you a good rate, consider locking it. Rates are expected to continue rising to combat inflation, but you won't have to worry about it if your rate is locked in. Just remember that it only makes sense to lock in your rate when you’re almost ready to close; most rates only stay locked in for one or two months.
The longer you wait to purchase your home, the more it will cost you in the end.
3. Pay mortgage points at closing. Also known as discount points, mortgage points are fees you can pay to lower your interest rate. One point typically costs 1% of your loan, so lowering your rate by one point on a $200,000 house would cost you $2,000. One perk to using mortgage points is that they may be tax deductible; if you can deduct your mortgage interest, chances are that you can deduct the cost of your mortgage points as well.
The truth is that it’s still a great time to purchase a home. During the rate hike of 1994, rates were around 8%, so today’s rates look great comparatively. However, as I mentioned before, we do expect to see more rate increases throughout the year, and home prices are showing no signs of falling. The longer you wait to purchase your home, the more it will cost you in the end.
There are still plenty of opportunities in our market. If you need help taking advantage of them or you have any questions, don’t hesitate to give me a call or send me an email.