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Helping Your Clients Cope with Rising Interest Rates

October 04 2018

hdc clients rising interest ratesFor the past few years, low interest rates have been a major plus for those looking to purchase real estate. Unfortunately, those interest rates have been and continue to be on the rise. This time last year, interest rates for a 30-year mortgage were around 3.8 percent. Today they're averaging around 4.6 percent. Before long, buyers may start waiting for interest rates to go down before making a move.

Credit Scores

One thing you should mention to those who want to enter the market but are afraid to overextend their budgets with an exorbitant interest rate is the fact that their credit scores play a major part in their final rate. Remind them: they can influence their credit scores a lot more than overall market interest rates!

Shop Around

Different lenders offer different rates, so just because the first interest rate your client is offered is a bit high, doesn't mean they can't find a better one. Also, look for non-interest rate deals like a certain amount off closing costs. These can help buyers save some of the money they're losing through interest.

Reassess Your Housing Budget

If your clients can't afford the higher interest rate, they may want to reassess how much house they can actually afford. It may be better to buy a more affordable house now, work on building their equity, and then check interest rates in seven to ten years. If the rates have dropped, they can find a pricier house, but if they're still climbing, your clients will be glad they bought what they could at the current interest rates.

There's No Way to Tell If/When Rates Will Drop

Interest rates can be hard to predict. But looking at past trends, rates probably won't be declining again for a while. The sooner a buyer can lock in their interest rate, the better. If they do wait, rates could continue rising and they could miss out on years of equity building. Even if interest rates do drop, your client may be able to refinance later.

You'll Know How Much Your Payment Is

Renting a home isn't always better than buying. In many cases, even with interest, home insurance, and property taxes, you'll pay less per month to buy a home than to rent one of similar value. Also, rent prices can go up at any time. Once you lock in a fixed-rate mortgage, you've got a price you can count on for the next 30 years.

There are a lot of great reasons to go ahead and buy a home now, even if interest rates continue to rise. Just remind your clients to keep their credit scores high, look for companies offering lower interest rates, and to keep their interest rate in mind when figuring out their housing budget. If your clients need help understanding how their mortgage works or the different mortgage options available, download our free checklists: First Time Homebuyer Mortgage Checklist and Understanding Your Mortgage.

To view the original article, visit the Homes.com blog.