Gone are the days when everyone’s being encouraged to buy a home with record low rates. In fact, the average rate has increased by more than a percentage point since the record low. If you did not take advantage of those rates to buy a house, you may be kicking yourself. However, there is still time to buy. Here are some things you need to know whether you’re buying, selling, or even refinancing your current property.
Even though they’re not at their lowest, the rates are still good for homebuyers. If the economy continues to improve, the rates will keep climbing, but not immediately. It has been predicted that the rates will be around 4.7 percent by the end of 2014. Expect them to get as high as 6 percent by 2017. So now may still be a good time to buy rather than wait for later. You can also refinance as long as your current rate is higher. Sellers should also get in on the action because they will have more buyers who can qualify now than in the future.
Not only are the interest rates rising, but so are the prices on homes. For this reason, it can benefit sellers to wait to list their homes. They don’t have to worry that the increase in interest rates will dampen buyer sentiment. The interest rates are climbing slowly enough to not make a mark on the housing market.
Fixed is Still Better
While adjustable rate mortgages (ARM) may look more appealing with their lower interest rates, they are still not competitive with fixed loans, particularly if you plan to keep the loan for a long time. As rates continue to rise, you will most likely see an increase in your loan if you choose an ARM. However, if you plan to be in your home for a short period (say five years), you may benefit from the lower initial rate of an ARM. The choice will depend on your long-term goals.
Once you have a contract in place, experts recommend locking in quickly. This will avoid a spike in interest rates before you close. You generally won’t have to pay for a lock that’s only for 45 or 60 days. You should only pay for a 90- or 120-day lock if your loan appears to be closing slowly. The cost for a locked rate is usually a quarter of a point for every 30 days you want it locked in.
While you may not have taken advantage of the low interest rates when everyone encouraged you to do so, it doesn’t mean you can’t get a good deal now. However, if you do plan to buy, now may be the right time so you can get more house for your money.