You’ve probably heard plenty about how rising Federal Reserve interest rates are making it more expensive for people to own a home. And if you’re in the market for a new home, you’re probably wondering what that means for you and your family. We break it all down below:
Monthly Payments Are on the Rise…
The most tangible effect of rising interest rates often comes in the form of a higher monthly payment for mortgages. This means that more homebuyers will either need to opt for less expensive homes, save up for longer for a larger down payment or agree to shorter mortgage terms if they can afford them.
…but You Still Have Options to Make a Purchase Possible
Even as rising interest rates are pushing monthly payments higher, the important thing to remember is that there are still plenty of opportunities you can take advantage of to help you purchase a new home.
Be sure to explore your financial assistance options with FHA loans and VA loans, or even USDA loans if you’re planning on living in a more rural area. You’ll also want to look into how buying a new home could benefit you during tax season to understand how it will fit into your overall budget.
Although these options may not reduce your monthly payment, they could reduce the overall barrier to entry for your new home — making it easier for you and your family to get into the home of your dreams sooner.
Keep an Eye Out for Interest-Rate Incentives from Builders
In addition to government-backed programs, many homebuilders in our area are now working to limit the effects rising interests rates are having on their homebuyers. K. Hovnanian® Homes, for example, is currently offering strikingly low interest rates on mortgages financed through its in-house lending program.
It’s always a good idea to check with homebuilders you’re considering to see if they offer any sort of special incentives or rate-lock offers that will help reduce your monthly payment. And even if they don’t, they’ll likely have other incentives, such as closing cost assistance or upgrade discounts, that limit the overall cost of the transaction.
More Interest-Rate Hikes Could be on the Way
A recent report from MarketWatch noted that there could be up to four more interest-rate increases in 2019, which means that monthly payments would continue going up, too.
Currently, interest rates are sitting at around 5% right now for a 30-year fixed-rate mortgage, so someone buying a $350,000 home with a 10% down payment and private mortgage insurance could expect to pay a little over $2,100 per month. If interest rates rose by just 1%, they could expect to pay an additional $200 per month on top of that.
Although interest rate hikes are uncertain, many economic analysts predict that they will happen in the year ahead. This means that buying a new home sooner rather than later will likely save you money in the long run.