5 Tips For Buying a Home While Rates are Rising, Pt. 1

Posted on September 12, 2022 in Buying A Home

By Brooke Mertz, Mortgage Lender

Buying a home is as much of a life milestone as it is a financial move. Therefore, you can’t always time a home purchase perfectly with the market. If you’re looking to buy a home while rates are rising, what can you do to check off the boxes on your home buying wish list without going over budget? In this article, we’ll offer 5 tips for buying your first or next home in a rising-rate environment.

1. Find the right mortgage loan.

There are a variety of mortgage loans available, which can be especially daunting to first-time buyers. As the area’s #1 Mortgage Lender, First Columbia’s team of home loan lenders are available to answer any questions you may have, review your financial situation, and recommend the mortgage loans that best meet your needs. For example:

First-Time Homebuyer Mortgage specifically for buyers who are new to the process
USDA loans for eligible buyers in suburban and rural communities
Low down payment mortgage options with the Pennsylvania Housing Finance Agency (PHFA) Loan and FHA loans
VA loans with up to 100% financing and no mortgage insurance requirement for eligible veterans and active-duty service members*
Special mortgage loans for medical professionals

One important consideration when rates are rising is whether to choose a fixed or adjustable-rate mortgage. ARM loans typically offer a lower fixed rate during an introductory period, after which your rate can adjust up or down depending on the benchmark. So, if rates fall in the future, your mortgage interest rate will fall, too, without the paperwork and closing costs associated with a mortgage refinance. Of course, if rates continue to rise in the future, you may be better off with a fixed-rate mortgage that can always be refinanced into a lower rate. Check out our adjustable rate mortgage calculator here!

2. Get pre-qualified for your mortgage.

A pre-qualification letter is a time-limited offer for the total amount you can borrow at a certain interest rate. It may change if your financial situation or employment status changes, but generally getting pre-qualified is a good indicator of how much you can borrow on your mortgage. It also shows real estate agents and sellers that your finances and credit history have been vetted, so you are a serious buyer. A pre-qualification letter can improve your chances of having an offer accepted, particularly in a competitive market. Learn more about pre-qualification, the first step in the home buying process, and contact one of our local lenders to start the pre-qualification process.

3. Put 20% down if you can.

The bigger your down payment, the less principal you’ll need to borrow, which will lower your monthly payment amount, enabling you to spend more on a home while staying within your monthly budget target.

4. Use gift money for your down payment.

This option won’t be available to everyone, but if your family can help you with your home purchase, you can use gift money for your down payment. The only rule is that you need to provide a gift letter stating that the funds are truly a gift, not a loan that needs to be repaid. You may also need to document the transfer of the gift funds from your relative’s account into yours.

5. Look for homes that have been sitting.

In the current market, many homes go under contract within a week of being listed for sale. However, if you can find one that has been on the market for a while, you may have more of a chance to make a lower offer and ask for a seller’s assist to cover some or all of the closing costs.

For 5 Tips For Buying A Home While Rates Are Rising, read Part 2 here.

^{*Interest on the portion of the loan that exceeds the value of the dwelling is not tax deductible and the consumer should consult their tax advisor.}