Should Higher Interest Rates Stop You From Buying A Home?
No. In fact, buying right now has upsides. We'll explain how to make them work for you.
It's 2023 and interest rates are up. You might be thinking this isn't a good time to buy a new home. Actually, it can be the perfect time, especially for first-time home buyers. Here are five reasons why now might be the right time to buy your new home.
1. You can negotiate closing costs.
While interest rates have increased in the past year, they are still excellent, especially compared to 30-40 years ago. Now that the market has cooled a bit, sellers are more willing to pay the buyer's closing costs again. This means a seller gives a little extra money to help with closing costs, which can help you to lower your monthly payments or buy down your interest rate. Talk with your agent and lender to understand your specific situation to put this to work for you.
2. You have more bargaining power on price.
The past few years have been a "seller's market." That was because there was a lot of competition, with buyers outbidding the available homes as the inventory was very low. Now, sellers aren't experiencing the same level of intense bidding so they can't inflate their prices. In Greenville and the Upstate of South Carolina specifically, we're finally seeing an inventory of new homes available again. This means buyers have more power in this market, allowing you to negotiate prices and closing costs. If you wait until interest rates come back down, you'll face more competition again.
3. You have options with your down payment.
The common belief about down payments is there you have to have 20% to put down. While ideal so that you don't have to get mortgage insurance, it's not required and there are plenty of options available for you.
With Fairway Mortgage, we can help you find a great loan interest rate and low private mortgage insurance with as little as 5% down. Plus, for first-time home buyers, the FHFA First-Time Buyer Mortgage Rate Discount program offers discounts of as much as 1.75 percentage points of market rates.
Keep in mind that the interest rate isn’t the only thing that determines the cost of your loan. The type of interest rate (fixed vs. adjustable) and the term (15 years vs. 30 years) are also important factors. Here's the key differences:
A fixed interest rate means that the interest rate won't change over the life of the loan. This can be good because you know what your payment will be each month and there won’t be any surprises.
An adjustable interest rate means that the interest rate can change over time. This can be good if interest rates go down, but it can also be bad if interest rates go up.
A 15-year loan will have a higher monthly payment, but you will pay less interest over the life of the loan.
A 30-year loan will have a lower monthly payment, but you will pay more interest over the life of the loan.
Learn more about Fairway Loan Options HERE.
4. The Greenville and Upstate area continues to grow. Be a part of it.
Buying a home is an investment. And, like all investments, you want to see it grow. How do you do that? Buy a home in an area that is growing so you have the best chance of selling in the future at a higher price.
Greenville has recently been recognized as the 4th fastest growing city in the nation. And across the Upstate, cost of living remains lower than in many areas of the country. We continue to attract new industries and companies to the area, which brings in new people that need homes today and in the future. These things combine to create the perfect recipe for continued growth, which means housing will stay in demand.
By buying now, you're participating in the growth and building value for your future.
5. Rents continue to rise. Waiting for interest rates to drop mean you're paying someone else's.
Rent prices have increased 20% in the last year. If you continue to rent so you can wait for mortgage rates to drop, you're simply paying someone else's interest. By buying your own home, you can put that money into building equity and increasing your networth.
Keep in mind that mortgage rates aren’t set in stone. If they do significantly drop in the future, you can usually opt to refinance. Though this will come with an origination fee, it can ultimately save you many thousands of dollars over the lifetime of your mortgage.