Buying a House While Interest Rates Dancing: What You Need to Know

If you plan to buy a house soon, you know how interest rates can impact your mortgage payments. With the recent increase in mortgage rates, buyers may be hesitant to move forward with their plans.

However, buying a house while interest rates are increasing may still be a good decision if you can wrap your head around all the moving pieces. What do you need to know about buying a house while interest rates dance around? 

Understand the impact of rising interest rates on your mortgage payments. Before pulling the trigger, understand the impact of an interest rate on your payment. Higher rates obviously mean higher mortgage payments, affecting your affordability and the home you can buy. Make sure you factor in these changes when determining your budget and shopping for a mortgage. Here's a couple things you can do do protect yourself in a volatile market.

Lock in your interest rate.

One way to protect yourself from future interest rate hikes is to lock in your rate. This means the lender agrees to give you a specific interest rate for a pre-defined period, typically 30-60 days, while you're processing your mortgage application. If interest rates increase during that time, you still have the lower locked-in rate. However, some costs may be associated with locking in your rate, so discuss this with your lender.

Be prepared for a more competitive market.

Higher interest rates can also mean a more competitive housing market, as buyers rush to lock in lower rates before they rise further. This can lead to higher prices and bidding wars. Be prepared to act quickly and make a strong offer, but don't let the fear of rising interest rates keep you from the benefit of home ownership.

Factor monthly expenses.

While interest rates are a big factor in your mortgage payment, they aren't the only one. Remember the other monthly expenses associated with homeownership, such as property taxes, insurance, and maintenance costs. Make sure you also budget for these expenses when determining what you can afford. Hiring a lender who will run realistic payment scenarios with property tax and insurance factored in is critical! 

Consider your long-term goals.

Interest rates are always moving and we have no idea where they will be 5 years from now. The beauty of owning your home on a 30 year fixed rate is that your payment stays the same even if interest rates go up! If interest rates go down you can re-finance the home into a lower rate. 

Buying a house while interest rates are moving around is still smart as long as you understand the implications and take steps to protect yourself. By locking in your rate, preparing for a more competitive market, budgeting for all monthly expenses, and considering your long-term goals, you can secure a home you'll enjoy for years to come!