What to do When Mortgage Rates are on the Rise

Mortgage rates are so high right now it’s likely scaring off potential home buyers. But life must go on, so if you’re still hoping to land a new home despite the high rates, try these tips to make it easier on yourself.

Understand the Market

The first step to making home buying more manageable is to understand that these rates really do matter. The interest rate on a 30-year fixed-rate mortgage is now about eight percent — the highest it’s been in 23 years. Earlier in the year, mortgage rates were hovering around six percent. While that’s not low either, let’s do some quick math. If you were looking to take out a $250,000 loan for a 30-year mortgage with six percent interest, your monthly payments would be $1,502. If you took out the same loan with eight percent interest, your monthly payments would balloon to $1,838. That’s a big chunk of cash and makes the loan overall much more expensive.

How to Navigate the Rates

Now that you get why it’s so important to secure a low-interest rate, here are some ways to make the current high rates not so bad:

• Get Help. First-time homebuyers can often find grants and help through state and local housing programs. Check your local housing authority and see if there are any discounts to be had. Sometimes they offer low or even zero-percent loans to first-time buyers.

• Boost Your Score. This goes for any time, but this is especially important now when interest rates are so high: Make sure your credit score is as good as possible. The better your score, the lower your interest rate will be.

• Be Flexible. Don’t be dead set on one type of home. Be flexible with your interests and you’ll likely find a cheaper home to purchase.

Do One Thing: Make sure your credit score is as high as possible before shopping for a mortgage.