By National Association of Home Builders
Mortgage interest rates have been inching up, and although rates dropped at the beginning of 2019, most experts predict that rates will continue to rise throughout the year.
With the average 30-year-fixed rate nearing 5 percent, some would-be home buyers may begin to reconsider their purchase plans. However, it’s important to keep today’s rates in perspective and be confident that it’s still a good time to buy.
For one thing, beyond minor short-term fluctuations, rates are not expected to significantly decrease any time soon. Only a decade ago, a mortgage rate as low as 5 percent would have been a better-than-average deal. Go back a little further, when average rates were mostly between 7 percent and 9 percent, and it’s quite a bargain. So if you’re ready to buy, go ahead and lock in today’s rate.
It’s not just interest rates that are rising. If you’re considering renting because of higher mortgage rates, take a good look at rent prices, too. When more people rent, rents tend to go up. Consider the cost of higher rent, and take another look to see how much interest those extra dollars per month might cover.
Either way, if you’re thinking of buying, run the numbers and see where you stand. Many factors influence the cost of a home purchase. Does the difference in payments between an interest rate around 5 percent and one a couple tenths of a point lower put it out of reach? Can you tweak other factors to balance the costs and keep the purchase affordable? Consider whether you might:
Put a bit more down so you can finance less. Is there somewhere you can dig down and find a bit more for a down payment? Maybe look into using some of that IRA savings which you can use penalty-free if you’re a first-time buyer.
Consider a shorter-term mortgage. If you can afford the monthly payments, a 15-year mortgage will cost a lot less in interest over the life of the mortgage than a 30-year mortgage.
Weigh your “must have” factors for a house — are there any that you’re willing to let go of for a lower asking price? Would a smaller house, or the next neighborhood over from your favorite, or one fewer half bath still work for you?
Shop and compare mortgage rates, fees, and terms. Whatever the going rates, there will be differences in rates and fees with different lenders.
Throughout the upcoming year, housing markets should expect rates to resume their ascent, heading near 5 percent by the end of 2019.
Visit www.nahb.org/forconsumers for more information on mortgage rates and buying a new home.
