Morgan: Keeping your monthly payment low despite interest rate hikes
Housing prices are on the rise.
In itself, this statement is nothing new these days. A severe housing shortage has caused home values to skyrocket.
But there is another problem that makes finding a house even more expensive.
To avoid record inflation, the Federal Reserve recently raised interest rates by 50 basis points, doubling the 25 basis point increase that most professionals were expecting to see anyway.
In December, the interest rate for a 30-year mortgage was 3.11%. In May, it was 5.53%.
The average home value in Maricopa is $400,000. In December, assuming a good credit score and a 20% down payment, with taxes and insurance, your monthly payment would have been $1,634.86. Now that payment is $2,089.62, a difference of $454.76.
The recent rise in interest rates will probably not be the last this year.
So if you are looking for a home, financing will be just as important as the price of the property you are looking to buy.
While the cost of financing will increase for everyone, there are some steps you can take to keep your monthly payments as low as possible:
Pay off your debts. A mortgage broker will look at two things when trying to determine your creditworthiness: your debt-to-equity ratio and your credit score. Paying off your debts will help both. Lenders give the best rates to people with a debt ratio of 42% or more.
Check your credit report. You need to look at the same information your lender will use to make their decisions. Make sure there are no chargebacks or misinformation. You can get a free report from each of the three credit reporting agencies each year at annualcreditreport.com.
Increase your income. Depending on how much you are trying to borrow, you may need to find a way to earn more money. It may be time to look for a better paying job or get an extra job.
Compare the prices. Be sure to shop around for prices with multiple mortgage lenders. Rates can sometimes vary wildly between different lenders. And, if the rates are the same, you could end up saving a pretty penny on fees. If you don’t have time to shop around, consider using a mortgage broker. They will buy the best rates for you and most of the time their fees are paid by the lender.
Dayv Morgan is a Maricopa Realtor and owner of HomeSmart Premier.
This sponsored content was first published in the June edition of In Maricopa magazine.