Are you searching for a new home in this new year? With mortgage rates on the rise in 2017, searching for your dream home now may be wiser than waiting it out.
Mortgage rates are predicted to rise anywhere to 4.5-5% over the course of this new year, up from last year’s national average of 3.65%. We know the anticipated rise in rates will affect buyers’ decision making in choosing a home, but there is a lot to consider in offsetting the cost of borrowing.
Here are a few factors worth the consideration:
1. Think long-term.
Sure, a 1% interest rate increase may inevitably alter your wish list a bit, but remember that your home is your most important investment, and what matters to you now may not matter to you in a few years. Are you planning to grow your family in the next few years? Maybe trading the in-ground pool for extra storage space or a gameroom isn’t a bad idea.
2. Remember that your costs run deeper than the down payment.
When you’re working out your home-buying budget, be sure you consider more than just the principal, interest, taxes and insurance. If you’re moving from an apartment to a four bedroom house, your utilities will likely increase a significant amount. In addition, if you’re moving closer to or further from your office, commuting costs will change. Will you allow room in your budget for home projects? Even small DIY upgrades can add up.
3. Consider an adjustable rate mortgage.
Adjustable rate mortgages have low, fixed-interest rates for a few years, typically five or 10, then adjust to a higher rate. If this isn’t an option for you, you can consider lowering the interest rate by paying a fee to the lender up-front– something known as buying down the interest rate.
4. Ask the seller to pay your closing costs.
Negotiating a deal that requires the sellers to pay your closing costs can free up more cash, helping offset a higher borrowing rate. As some buyers become priced out of their price points, sellers may have to be more flexible on things like list price, closing costs, and other negotiables.
5. Research the HOA.
If you’re looking to buy in a neighborhood governed by a Homeowners’ Association (HOA) be mindful of the fact that non-negotiable rules and costs may be written into the HOA agreement of your new community. Know the cost of your HOA’s fee, and then look for clauses about home improvements, the possibility of renting your home if you move temporarily, noise guidelines and parking rules. If the costs outweigh the benefits for you, consider a home outside of an HOA governed community.
With so much to think about before purchasing a home, it’s vital to have a diligent and knowledgable professional in your corner. At Krueger, our agents are devoted to guiding their clients through each step of the intricate process. When you’re ready to find your new home, we’ll be ready to guide you there.