The housing market has been a rollercoaster the last few years, and both homebuyers and sellers are exasperated by the ride. Mortgage rates dropped to record lows when the pandemic hit. Now, mortgage rates will surge to their highest since 2018. As inventory remains low and mortgage rates climb, there are a lot of looming questions for both buyers and sellers.
While it’s difficult to predict the mortgage interest rates forecast in 2022, there are things buyers can do to mitigate the impact of higher mortgage rates. Whether you are purchasing an existing home or building a custom home, it’s important to learn your options to help you save money in the long run. While you can’t control interest rates or the current housing market, you can prepare financially for the home-buying process.
Every decision you make when applying for a mortgage and purchasing a home matters, especially when mortgage interest rates climb. No one can predict exactly when mortgage rates will lower, but there are a few things home buyers can do to reduce the impact of higher mortgage rates. If you are shopping for a home, plan your home-buying process carefully to mitigate the impact of high mortgage rates.
How High Will Mortgage Rates Go in 2022?
Mortgage interest rates vary based on several different factors. First, a mortgage rate hinges on the length of the mortgage term. If you opt into a 30-year term, for example, you will pay a higher mortgage interest rate than someone who chooses a 15-year or 10-year mortgage.
Last year, home buyers bought homes at relatively low-interest rates, with the 30-year rates averaging around 3.1% by the end of 2021. Rates have continued to skyrocket in 2022, with the average 30-year interest rate practically doubling to 5.80%. This year’s numbers differed from 2021 projections, and it’s possible that 2022 rates have yet to stabilize.
When shopping for a home, it’s important to stay within your budget, as interest rates will add to your total and monthly costs. This may require you to consider smaller floor plans that are available at a lower price point. Remember, when looking at the asking price for a home, keep your interest rate in mind so that you are not blindsided by your monthly mortgage note.
Strategies for Dealing with Higher Mortgage Rates
You can’t control the housing market or this year’s mortgage rates, but you can take the necessary steps to lower your housing costs. This includes discovering ways to lower your personal mortgage rate. As a homebuyer, it’s time to consider several factors that can lower your rates over a mortgage of any duration.
To start, spend some time shopping around for lenders. This applies to primary and secondary home mortgage rates. Mortgage bankers, regional banks, national banks, and credit unions all offer a variety of rates for buyers. Importantly, some lenders cater to new homeowners, while some focus solely on refinancing. A knowledgeable real estate agent may also offer some suggestions, but you ultimately need to speak with a trustworthy lender with rates that work best for your budget.
Boost your credit score.
Navigating the mortgage application process is much easier with a solid credit score. Regardless of the loan term, you are much more likely to get a better rate with a high credit score. To build your credit, make sure you pay your bills on time each month and pay off your debt as soon as possible. If you already own a home, take steps to improve your credit score so that you can refinance your home at a better rate.
Consider a rate lock.
If you are worried about climbing interest rates, think about paying extra for a mortgage interest rate lock before you close on the home. While it may seem more expensive to pay a fee, it could be worth it if rates continue to change rapidly. One important thing to keep in mind, however, is while rate locks protect you from higher rates, they also prevent you from securing lower rates as well.
Entering the home-buying process can be intimidating, especially when higher mortgage rates enter the equation. By preparing yourself before shopping for a home, however, you can mitigate the impact of high-interest loans. To learn more about mortgage rates in 2022, call the professionals at Lancia Homes now.