By Sarah Hordusky
There has been a lot of talk about interest rates rising over the past year. One of the biggest problems I have seen for buyers is that as the interest rates rise, their budget decreases. When there are big fluctuations in interest rates, it is important to talk to your bank or mortgage broker to get an updated pre-approval letter before submitting an offer on a house. If an offer is accepted with an old pre-approval letter, and you end up not being able to afford the price with the increased interest rates, you could be at risk for losing your deposit. In this blog post, I am going to give you some tips on how to stand out as a strong buyer as interest rates rise!
In a competitive market, it is important to do your research and have your “must haves'' for your home established early on. This can help you narrow down your options and reduce stress by keeping your search for a home simple. Expand your search to other areas you may not have considered! Some markets and neighborhoods are more affordable than others. Check into different housing options like condos or townhomes. Although prices have risen, they can be more affordable than homes!
Financial education will help you become a stronger buyer. I highly recommend reading books and listening to podcasts about personal finance. I started doing this a few years ago and it really opened my eyes to the importance of creating a budget, investing, and developing long and short term financial goals. Here are a few books and podcasts about personal finance that I have learned a lot from!
Personal finance books I recommend:
The Simple Path to Wealth by JL Collins
Personal finance podcasts I recommend:
When buying a home, your budget matters! Especially if you’re faced with the possibility of having to borrow more than you expected. The word “budget” tends to make people wince, that is why I recommend you talk to a trusted advisor or mortgage lender about your financial position so you know what you can actually afford!
You should be aware of what kind of debt you have and exactly how much. It is important to check your credit score and understand its value and what factors can impact it. Steps you can take to increase your credit score are paying off or reducing higher interest debts such as credit cards, paying your bills on time, and correcting any mistakes you might find on your credit report.
If you are using an old pre-approval with a much lower interest rate, the most important thing for you is to get an updated pre-approval with the current interest rates. As you are reviewing your need to get an updated pre-approval, assess your cash on hand. You do not have to put 20% down on a house! You can put 0% down on a USDA or physician’s loan, just 3.5% on FHA, and well-qualified buyers can put down just 3-5 % on a conventional loan. Determine your debt-to-income ratio and hen make a plan to save money, pay down debt, or increase your income. This will help you be an even stronger buyer to the lenders!
Hire an agent that knows the market, has great communication and negotiation skills, and is focused on you and your needs, not just the transaction. Finding the perfect home and getting it under contract is a life-changing event, so having an experienced professional on your side will be extremely beneficial over your competition.
If you're interested in learning more about me and how I help buyers and sellers, reach out today by visiting my contact page!
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