The increase in interest rates over the last few months and especially over last year have edged some home buyers out of the market. What was once an affordable mortgage before the interest rate increase may no longer be affordable.
In a recent article by The New York Times, feds are considering raising interest rates at an even faster rate than before to ease inflation and stabilize the economy.
What does that mean for eager home buyers and how do they prepare for their next home purchase despite the rise in interest rates? Here are some considerations.
Considerations for Your Next Home Purchase
If home ownership is still a top priority for you, reconsider the type of home you may want. If the big house with the acre of land on a private street is now out of your price range, consider a smaller home in a neighborhood.
Buy a Starter Home
If you are a renter and can’t stand paying someone else’s rent, think about buying a condo or townhome as a starter home. This way, you can take advantage of creating your own equity in a house you own rather than throwing money away in rent. When the market shifts and the rates are more favorable, you can use that opportunity to sell your home, take the equity, and purchase a home in an area of your choosing.
Improve Your Credit Score
Use this time to prepare your credit for a great rate. If you have credit card debt, consider paying it down so that you have the ability to get a better rate once the interest rates become more favorable. Avoid opening new accounts or having your credit score checked often. Take this opportunity to check your credit score so you are prepared to get qualified for a great loan so when you do find the home you want, you are well-qualified to purchase it.
Investigate Other Neighborhoods
Consider looking at other neighborhoods that you may have ignored. Use this “cooling off” period in between rate hikes to really narrow down the areas you want to live. There are some hidden gems that may just have a home you like or that you would reconsider living in if you are priced out of the neighborhoods and homes you originally wanted.
Talk to Your Realtor
This is a really good time to have a heart-to-heart with your Realtor. Discuss the off-market listings he or she knows about. Ask if there is a home coming on the market that you can purchase before it hits the market. There are a lot of sellers who would rather take a good, clean offer rather than sit through weeks of open houses with strangers coming through their doors. Money isn’t always the driving force behind a seller’s decision.
Put an action plan together of what to do to prepare for your home buying journey. What do you need to do to set yourself up for success? Discuss your questions and concerns with your Realtor. Sometimes your Realtor has solutions for other buying options.
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