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Best Advice For Home Buyers With Rising Interest Rates
Thinking of buying a home? With interest rates rising, you may want to consider doing so sooner rather than later. Here are some questions and advice for you as a buyer.
Should home buyers buy a home when interest rates are rising?
With the economy heating up, experts are predicting an increase in interest rates over the next six to eight months. With both interest rate and home price increases, a buyer will pay more for the same home next summer. In northern climates, fall and winter months can be an ideal time to purchase as there are fewer buyers looking and more motivated sellers.
What types of loans should buyers consider?
The best loan depends on the individual buyer's situation.
If a buyer has a large down payment, a conventional loan is the way to go as private mortgage insurance (PMI) can be avoided. Private mortgage insurance can add hundreds of dollars to the monthly payment.
If a buyer is seeking a rural property, rural development (RD) could be a great option as it requires no down payment. These loans will include PMI until the equity in the home hits 20 percent. RD loans require homes to meet minimum standards so all homes will not qualify.
The Veteran's Administration (VA) is a great option for those who qualify. VA loans require no down payment and have no PMI. Interest rates are typically lower than conventional loans. Like RD loans, VA loans also requires homes to qualify for the loan.
FHA can be a great option for those with a lower credit score. Borrowers can have a credit score as low as 580. Interest rates can be lower than conventional loans. PMI, however, is now added on the payment for the life of the loan. Like RA and VA, FHA requires that homes meet minimum qualification standards.
What should home buyers do to get the lowest-cost mortgages?
Buyers should explore the different loan types and see what works best for their particular situation.