Mortgage rates are on the rise. And this is changing the situation for many home buyers in the Lehigh Valley.
Here’s what you need to know about rising rates and what you can do about them.
What Rising Interest Rates Mean for Lehigh Valley Buyers
‘Rising interest rates’ means it’s getting more expensive to borrow money.
If you’re planning to buy a home, this is a big deal because you’re probably going to need to borrow a substantial amount of money to buy the home. The higher the interest rate on your mortgage is, the more you’ll pay every month on your mortgage payment.
Here’s how mortgage increases are changing home buyers’ needs:
Shorter term loans are more appealing
Shorter loan terms come with lower interest rates than longer term loans. Your monthly payment will be higher, but you will have your home paid off sooner. And you’ll save a substantial amount of money over the term of the loan.
ARMs are less appealing
Adjustable Rate Mortgages (ARMs) give you a lower interest rate to start, but there’s a big catch: your rate changes as the Federal Reserve changes their interest rates. Since the Fed’s interest rate is expected to continue increasing, you’re probably better off locking in a conventional loan at today’s relatively low rate.
Historically speaking, rates are still low. So now is still a great time to take advantage of rates before they rise further.
3 Ways to Get a Low Interest Rate
There’s not much you can do about the Fed increasing interest rates. But even as interest rates rise, there are things you can do to make sure you get the lowest possible interest rate on your Lehigh Valley home.
1. Shop around
Different mortgage lenders offer different interest rates. So don’t contact just one lender. Shop around and get quotes from multiple lenders to see who offers the lowest rate.
2. Improve your credit score
The better your credit score is, the more confident your lender is that you will repay your loan. So if you have good credit, lenders will offer you a lower interest rate.
3. Increase your down payment
Increasing your down payment means your loan amount will be a smaller percentage of the home’s value. Having more of your money invested in the home makes lenders more confident that you’ll repay the loan.
This lower risk for the lender is rewarded with a lower interest rate. So see if you can pull more of your savings for the down payment. Or even receive a cash gift from family and friends to increase your down payment.
With mortgage rates expected to rise for the foreseeable future, the clock is ticking for home buyers. If you plan to buy, do it now while the rates are still relatively low. You want to lock in your mortgage before the rates jump again!