The price of housing is on the rise.
In and of itself, that statement is nothing new these days. A severe shortage of housing inventory has driven home values through the roof.
But there’s another wrinkle that’s making house hunting even more expensive.
To stave off record inflation, the Federal Reserve recently raised interest rates by 50 basis points, doubling the increase of 25 basis points that most professionals expected to see anyway.
Back in December, the interest rate for a 30-year mortgage was 3.11 percent. In May, it was at 5.53%.
The average home value in Maricopa is $400,000. In December, assuming a good credit rating 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 interest rate hike likely won’t be the last this year.
So, if you are in the market for a home, financing is going to 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 actions you can take to keep your monthly payments as low as possible:
Pay down your debts. A mortgage broker is going to look at two items when trying to determine your creditworthiness: Your debt-to-income ratio and your credit score. Paying down your debts will help both. Lenders give the best rates to people with a debt-to-income ratio of 42% or better.
Check your credit report. You need to look at the same information your lender is going to use to make their decisions. Make sure there aren’t any delinquencies or false information. You can get a free report from each of the three credit reporting agencies every year at annualcreditreport.com.
Increase your income. Depending on the amount you are trying to borrow you may need to figure out how to make more money. Maybe it’s time to look for a better paying job or get an extra job.
Shop around. Make sure to price shop with multiple mortgage lenders. Rates can sometimes vary wildly between different lenders. And, if the rates are the same, you may end up saving a pretty penny on fees. If you don’t have time to shop around, consider using a mortgage broker. They will shop for the best rates for your and most of the time, their fees are paid by the lender.
This sponsored content was first published in the June edition of InMaricopa magazine.