Thursday, December 15, 2016

Interest Rate Increases

According to the latest reports, the Federal Reserve is planning a series of gradual increases to its federal fund rate - a decision that will lead to an increase in interest rates for home mortgages.  While this has made for glaring headlines for some - the real concerns about this change are over rated.

The housing industry has been aware for years that the current interest rate levels were unsustainable and put into place only to assist a struggling housing market.  Housing is now back on its feet and will be able to weather gradual changes to the interest rates.

So what do you do as a buyer?  Plan.

Evaluate your budget in light of possible interest rate increases. A good rule of thumb is that for every .05% increase in interest rate, there is a $100 increase to the monthly mortgage payment cost on a 30 year mortgage - for a home that costs about $300,000.  This may help you plan for your monthly payments depending on what price home you are looking to buy.

Ensuring that your credit score is is in the best shape possible is one way to lower the cost of your mortgage.  Pay off any outstanding debts before looking to acquire a mortgage and don't make any other large purchases prior to buying a new home.

Save more!  Save more for a down payment to help offset any additional monthly payment costs due to increases in interest rates.

The best way to prepare for changes in the housing market is to understand your total financial picture and talk with financial companies and builders you trust.  Ask the experts for their opinion and learn from their experiences in the always changing housing industry!

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