If you are in the market for a new home, here are a few ways this rate hike may impact you in the future.
You May Need To Adjust Your Budget
Any increase in mortgage rates will be gradual. Even a small increase in mortgage rates, results in a higher monthly mortgage payment. In order to stay within your monthly budget, it may make sense to lower the target price of your new home. This is especially true if you are a first-time homebuyer. If you are a current homeowner looking to sell your current home, you may get a higher interest rate on a future mortgage than on your current mortgage.
It May Be Harder To Get A Mortgage
When the Fed increases interest rates, it can become more difficult to obtain credit. This is as true for a mortgage as it is for a credit card or personal loan. If you have short-term credit debt, the rate increase may also raise your debt to income ratio, which is one of the many things that is evaluated when you apply for a mortgage.
What You Can Do
Whether you are ready to start house hunting today or are considering moving in the next few years, there are a few steps you can take to minimize the impact of the Federal rate hike on your mortgage.
Pay down any credit cards – This is particularly important if you have high-interest credit cards carrying large balances. As the interest goes up, it may become more difficult to pay off your balance. Paying down the balance on your credit cards may also improve your credit score.
Save for a Down Payment – The more money you are able to put towards a down payment, the less you will have to borrow. A larger down payment not only means you will be paying interest on a smaller amount of money, but it may also help you qualify for a lower interest payment. As a result, a larger down payment could easily save you thousands over the course of your mortgage.
If you have any questions about how the Federal Reserve impacts mortgage rates or any other questions about mortgage lending process, feel free to contact us today we are here for you.