Kelly Broaddus  |  eXp Realty  |  888.446.5602  | Contact Kelly

Here are four easy methods for dealing with rising interest rates.

"How do I buy a home when interest rates are rising?"
Many clients have reached out to ask me this question recently. In case you don’t know, the Federal Reserve recently raised rates by 75 basis points—the largest increase since 1994. There’s no denying that higher rates make homes less affordable, so what can you do? 


Fortunately, there are plenty of creative ways to deal with rising interest rates, and I’d like to share three of them with you today

1. Improve your credit. You may think your credit score is already as good as it can be, but there is always room for improvement. Start by paying off your debt little by little. This will lower your debt-to-income ratio, which is what lenders use to determine your creditworthiness. You don’t want to pay off everything all at once because this will only negatively affect your credit. Talk to your credit counselor or preferred lender for the best way to pay off your debt.


"Mortgage points are fees you can pay to lower your interest rate."


You should also save as much money as you can. As a general rule, the more money you have for the down, the better it is for your situation. Try to be disciplined and set money aside. 


2. Lock in your mortgage rate when it makes sense. If your lender is offering you a good rate, consider locking it in. Rates are expected to continue rising to combat inflation, but you won’t have to worry about that if your rate is locked in. Just remember that it only makes sense to lock in your rate when you’re almost to closing. Most rates only stay locked in for one to two months.


3. Pay mortgage points at closing. Also known as “discount points,” mortgage points are fees you can pay to lower your interest rate. You can do it yourself, or you can ask your seller to contribute closing costs to pay down your interest rate. One point typically costs 1% of your loan, so a point on a $400,000 mortgage would cost $4,000. A nice perk of mortgage points is that they might be tax-deductible. If you can deduct your mortgage interest, chances are you can deduct the cost of your mortgage points as well. 


4. Check if your jumbo rate or adjustable-rate mortgage is more affordable. If your jumbo loans are more affordable than the conventional rate, consider getting one instead. You may also want to check other programs such as the adjustable-rate mortgage if it best fits your needs.


There are still plenty of opportunities in our market. If you have any questions about interest rates or purchasing a home, please call or email me. I am always willing to help!