As Mortgage Rates Rise, This Home Buying Strategy Could Gain Popularity

Millions of Americans believe that this is actually one of the worst times to get themselves a home because of how expensive most properties are, and not everyone can afford them at the moment. This is based on the most recent survey courtesy of mortgage company, Fannie Mae, which revealed that the percentage of people thinking of becoming homeowners this year has dropped dramatically. The stable income and home buying ratio aren’t exactly equal – in fact, the home prices are way more expensive now that they were last year, but the number of people thinking that the price will go up even more actually went down by 2 percent.

Zillow speculates mortgage rates rising even more this year

Mortgage Rates Goes Upwards

Despite the survey, the Mortgage News Daily reported that last December the rates actually went down from 4.85 percent all the way to 4.61 percent on the 30-year fixed rate. However, this doesn’t stop experts from speculating that the mortgage rates will rise even more in 2019.

According to the Vice President as well as the chief economist of the mortgage giant Fannie Mae, people who are planning to get a home have definitely changed the minds because of the price hike within the last month, which is the same thing that happened exactly a year ago. This is because even if the price went up very slowly last year, it still left a significant mark on the housing market, especially for new entrants who are still hesitant to buy their first home.

Percentage of people willing to buy a home, while rates are up, continues to decrease

Current economic conditions are another reason for slow purchase activity. The survey suggests that even though average household incomes in 2019 are higher than they were a year ago, the number of people whose income was raised was much lower than last year.

The survey, however, showed that most people are pretty confident when it comes to employment since over 79 percent of them believe that they will not be losing their jobs anytime soon, which is much higher than last year.

Meanwhile, the percentage of young adults looking into getting a mortgage is still low as they believe it’s best to rent a property than spend years to purchase their own homes. The fact that home prices continue to go up is just giving them more reason not to change their minds.

Tricks for Buying While Prices are High

A higher price will definitely not encourage anyone to purchase a home. However, you may be convinced once you find out that you can actually afford one, even if the prices are this high. One of the best strategies that you can use is to pay your lender upfront so that the interest rate will be reduced.

This is definitely something that will help potential buyers, and at the same time, it will also help sellers and lenders since the market is pretty slow at the moment due to rising rates. The last recorded median listing for home courtesy of Zillow was $276,000, which is definitely a lot and might scare off potential buyers who are on a budget.

Purchasing mortgage points may be the best or worst decision for you

So with this particular strategy, you’ll be paying for the mortgage points which is basically an option that some people choose. However, it is usually not offered to every buyer so if you are already aware of it then it’s best to ask for more information from your lender.

Keep in mind that mortgage points are not exactly an option for everyone who wishes to purchase a home while the rates are high. These points will serve as a percentage so each point is 1 percent of the amount that you wish to borrow. For instance, you decided to borrow a hundred thousand dollars, which is equivalent to a thousand points. This just means that you must pay your lender $1,000 once you close your loan.

However, one of the best ways to do this is to not make a downpayment for the points anymore especially if you can afford to pay for them in cash. This is because if you make a down payment, the balance of the money you wish to borrow will be reduced. But if you pay for your points upfront instead of making a downpayment, your balance will increase but the interest rate will end up low.