Be Smart With City Chic: How Interest Rates Impact Home Buying
Get Smart With City Chic is a bi-weekly column that gives you the real insight into what’s going on with DC’s real estate market. Sponsored and written by Lindsay Dreyer, the broker/owner of Chic city real estate.
Unless you’ve been hiding under a rock, you’ve probably heard the news that interest rates have risen significantly since the spring. But what does this mean for buyers in today’s market? It’s hard to separate fact from fiction when it comes to buying a home, and especially getting a mortgage. So what role do interest rates play in your purchasing power?
Simple answer: Interest rates are directly correlated to your monthly mortgage payment, so when interest rates go up, your monthly home loan payment goes up too.
How are interest rates determined?
Contrary to popular belief, the Federal Reserve does not directly determine mortgage interest rates. Mortgage lenders base interest rates on the current market, plus a markup that represents the lender’s profit. This is why you will see rate fluctuations even though the Federal Reserve has not made any rate changes.
Do all mortgage lenders charge the same rate?
Nope! Each lender charges different fees and interest rates, so we encourage all of our clients to speak to 2-3 different lenders.
Should you buy now or wait for rates to fall?
I wish I had a crystal ball so I could tell you what’s going to happen with house prices and interest rates! We are coming out of a period where we had historically low interest rates. My guess: We’ll probably never see interest rates again within 2. However, if you want to buy a house, that you can pay your mortgage at current interest rates, and that you have a long-term game plan , I don’t think there’s a reason to wait. If rates go down, you can always refinance.
It’s not all bad news
We’ve had record demand for homes over the past few years, and it’s been tough on buyers. We see things starting to calm down, and a reprieve from the insane bidding wars is a welcome change! That’s not to say the bidding wars are completely gone, but it certainly feels less frantic.
No one can time the market perfectly, not even real estate agents. If you’re ready to become a homeowner, now is the perfect time to take the plunge. Especially if you are in a stable place. Don’t let the news of rising rates scare you!
City Chic Real Estate is an independent, woman-owned real estate company specializing in helping first-time buyers and sellers in the DMV. Book a no-pressure introductory call with our team at citychicre.