March 4,2024

Getting a mortgage when the interest rate is high.

When interest rates are high, getting a mortgage can be more challenging but it's possible. Here are some strategies you may consider:

 

  1. Know your credit score and learn ways to improve it. A higher credit score can help you qualify for a better interest rate, even when rates are high. Pay off debts, make all payments on time, and keep credit card balances low to improve your score. If you’re tempted to buy gas and food with an ATM card, don’t! Use a credit card and pay off the complete balance every two weeks. When you use an ATM card, the money is debited from your account immediately.   To build credit scores you need to show you’re responsible and can pay them off on time. If you don’t have a credit card and you’re getting, turn down, get a secured credit card. Again, pay off your balance every two weeks.  Take care of all old debts you may still have. If you follow these few guidelines, in six months or less, your credit scores will be much improved.

 

  1. Save for a larger down payment A larger down payment can help offset the impact of high interest rates by reducing the amount you need to borrow. It can also make you a more attractive borrower to lenders. With a larger down payment, you would have more loan options.

 

  1. Shopping around for the best rate is NOT the best idea!   Why? Don’t get me wrong, the rate is important but the costs to get that rate is more. Don’t waste your money paying high closing costs to find the best rate. Considering this fact, interest rates go up and down over time. Chasing a low rate in the high-rate environment is not using your money wisely. Ask anyone who has owned a home for more than 10 years how many times they have refinanced.  Do you think you will refinance to a lower rate later? I believe you will.  The average timeline to stay in a home is 7 years. You will have many opportunities to refinance into a much lower rate. I personally work with my clients to lower their interest rate, keeping closing costs as low as possible. This is why you should use Farris Mortgage to find the best deal! 

 

  1. Adjustable-rate mortgages (ARMS) are not usually your best optionIn today’s world you will be paying points to get an ARM.  While fixed-rate mortgages tend to have higher interest rates during periods of high rates, adjustable-rate mortgages (ARMs) may offer lower initial rates, but that adjust over time. Adjustable-rate payments have the potential to increase in the future, therefore, I’m not a big fan of ARMs.

 

  1. Look into government programs.  Government-backed loan programs, such as FHA loans or VA loans may offer more favorable terms, even when interest rates are high. These programs often have lower down payment requirements and more flexible qualification criteria. Both programs are available at Farris Mortgage.

 

  1. Consider a shorter loan term. A shorter-term loan will save you the most amount of money, plain and simple! While shorter loan terms may result in higher monthly payments, they often come with lower interest rates. When the rates get lower, I would strongly consider a shorter-term loan ONLY if you can afford higher payments.

 

  1. Lock in your rate. If you find a favorable interest rate, consider locking it in with your lender. This will protect you from rate increases while your mortgage application is being processed.

 


Remember to carefully consider your financial situation and long-term goals when choosing a mortgage and a company you can trust, especially when interest rates are high. Consulting with a mortgage broker can also help you navigate the process and find the best option for your needs.

 


     

 

Bradley Farris

FarrisMortgage.com                              

Serving the Ozarks since 1994

2412 East Madrid                                                                
Springfield, MO 65804

417-887-9595  phone
417-887-9596  fax

NMLS 261793, MO #1663, NMLS 1220790