Rates are going up: 5 things to do now
Mortgage rates have jumped in the last month. To say the rise has been fast and dramatic is an understatement. I have spent countless hours acting as a financial crisis counselor talking potential homebuyers out from under their beds.
“Yes, it’s still a good time to buy a house. “
“Even after the jump, rates are at historic lows. Do you know what rates were in the 1980s?”
“Rising rates are a sign of a healthy economy.”
“It’s OK, let’s do the new payment together. Breathe. Have a glass of wine. I’ll have one too.”
30-year fixed rate loans with rates in the 3% range were never going to last forever. With mortgage rates now in the 4% range, here are five tips to help you survive and thrive in the current climate:
- If you have already been preapproved, check in with your lender. Have them update your prequalification based off current rates. If you were “Max Qualified,” you many no longer qualify for the price you originally thought.
- Don’t fall for scams. If you own a home, expect your mailbox to become flooded with last-chance flyers advertising insanely low rates. However, the loan will most likely be an adjustable rate mortgage, with a built-in cost to buy down the rate. The rate quote will probably be from out of state and a 20% loan to value. Always read the fine print!
- If you were qualified for a 3% conventional loan, you may want to explore FHA loans. In many cases, the payment is so much lower than conventional that it’s difficult to ignore. If you are in a USDA-eligible area, check to see if you qualify.
- Consider buying the rate down. You can pay for points upfront to buy down the mortgage rate. One point costs 1% of the loan amount. On a $100,000 loan, one point will cost you $1000. I always buy the rate down when I am buying a long-term property. You don’t have to buy a whole point to get a big jump!
- Get a mortgage checkup. Reevaluate your current mortgage to make sure it still meets your long-term goals. If you plan to retire in the home, check to see if a 15-year fixed loan would make more sense. If you have a first and a second mortgage, explore combining them to see if that would save you money and protect you from rising rates.
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