Does the news of rising rates make you second guess buying your first home in 2019? It shouldn't and here's why:
Higher Rates But Not Frighteningly High
With headlines that read "Feds Hike Up Mortgage Rates -- Highest Since 2014," it's no wonder that you doubt that it's a great time to buy your first home. While it's true that the mortgage rates are higher than 2014, historically, the increase tells a different and promising story. Homebuyers in 2017 took advantage of a prime environment that included higher employment rates and low mortgage rates.
However, we must keep in mind that although interest rates were low, they were, in fact, higher than they were in years prior!
As many of you can remember, 2008 marked the beginning of a horrific economy in the U.S. Unemployment inched closer and closer to 10 percent, and those that were employed didn't have much job stability. Understandably, the Feds had to take measures to pull us out of recession by lowering rates --but the goal had always been to increase rates gradually as the economy recovered.
And that's what they've been doing, slowly increasing in relation to the strength of the economy.
You Can Still Afford to Buy a Home Despite the Increase
In a competitive housing market, you're worried that you'll be outbid. But in a higher mortgage rate market, does that mean you're out altogether? No!
While the current rate increase and planned increases by the Feds change things, it does not substantially change your buying power as a potential homebuyer.
How much you qualify for is more a matter of your income, debts, credit score, and the amount you can put as downpayment --and less to do with mortgage rates.
The rates do, however, impact your monthly payment. So for those homebuyers with a set monthly mortgage payment window, rising rates may change the listing prices of the homes you're looking at. On the bright side, an increase in rates sometimes means lower asking prices --again, ensuring that you can still buy your dream home at a reasonable cost and affordable monthly payment despite higher interest rates.
Don't let the hype of higher rates scare you into thinking you missed out on buying your first home. When you look at current mortgage rates in a historical lens, you'll see that it's a sign of a strong economy and the modest increase does little to affect your buying power.