Low Interest Rates
The low interest rates that have been available to homebuyers for the past few years have facilitated many purchases that may not at been feasible otherwise. Even a small fluctuation in rates can impact a person’s ability to finance the home of their dreams. Now that interest rates have begun climbing, albeit slowly, many buyers are finding it necessary to adjust their expectations in terms of just how much home they can afford. The Federal Reserve's recent decision to raise interest rates by a quarter of a percentage point is a great example of just how impactful any rise in rates can be.
The Whole Picture
Most people looking to buy a house must finance at least a portion of the purchase. The typical amount of money down is still about 20 percent, which means most buyers are financing about 80 percent of the total purchase price of their homes, whether they do so through a bank, a credit union or another entity like the Veterans Administration. When you decide to buy a home, it's important to go into the process with a working knowledge of how much of a down payment you can afford and how much in your monthly payments will be. Rising interest rates will have a significant impact on the amount you must pay monthly to satisfy your lender on a 15, 20, or 30–year note.
When you begin shopping for a home in a climate of rising interest rates, you may actually find that there are benefits. Yes, higher interest rates mean higher monthly payments and more money paid out over the life of the loan, but you may find that homes in your market are actually listed for lower prices. This sometimes happens because more would–be buyers figure they can't afford a home when interest rates are higher. Therefore, there might be fewer people shopping, a circumstance which often results in lower-priced homes.
When interest rates are high, meeting the traditional 20 percent amount for a down payment can be challenging. There are other options available, though. You should see if you qualify for an FHA loan or if you can borrow money from the USDA. The down payment on an FHA loan is significantly less than most traditional lenders require. The requirements for qualifying for these types loans, however, can be rather strict. A high credit score is a must to attain an FHA loan. In order to get a USDA loan, a borrower must typically be planning to run an agriculture-based business on the land purchased. Due to the challenges the process of obtaining these loans presents, it’s probably more likely you’ll end up with a traditional lender who can help you lock in the current interest rate on a 15 or 30-year mortgage.
Now that you know a little bit more about loans and how interest rates affect them, you’re ready to do some home shopping in Ohio. Your first step in this process should be contacting realtors in Athens Ohio. Check out www.ohio-realty.com for tips on how to shop and how to negotiate the best financial situation during your homebuying experience. Doing some research beforehand means fewer surprises during the actual buying process, which usually results in more confidence for buyers. The more informed a buyer is from the get-go, the more comfortable and satisfied they are likely to be with the deal they are able to arrange with the seller and their lender.