Can I Still Purchase a Home with Rising Interest Rates?

There’s so much to love about having a home of your own. You can put down your roots, pursue your interests and hobbies, and enjoy the freedom to control your housing situation.

One thing that prospective home buyers don’t love is the soaring cost of homes today. And that’s just one factor; rising interest rates have made homeownership even more expensive.

Unfortunately, there isn’t anything you can do about inflation and rising rates. You can, though, adjust your home-buying plans to help open the door to homeownership. Here’s how:

• Up your down payment. Sure, it’s hard to think about raising your down payment when housing prices are so high. The fact is, a larger down payment can help you reduce the amount you have to borrow, get a more favorable interest rate, and potentially reduce private mortgage insurance (PMI). Wondering how you can increase that down payment? Consider holding off a bit on your home-buying plans to have more time to save. Or, ask for gift funds from someone who has the means. Depending on your situation, you could also look into down payment assistance programs offered through your state or local housing agency. Stock Yards Bank Right at Home program may also be a great option for you, which has options for no down payment. You can't control rising prices, but you can control how you choose to spend your money. Take the time to review your budget and look for ways to cut spending on things you don't need. Or, think about getting a side hustle to bring in more money.
• Buy a less expensive home. You may have your heart set on a certain type of house in a certain location, but if you want to own a home in today’s market conditions, you may have to alter your plans. Maybe instead of purchasing a pristine, move-in-ready home, you buy one that needs repairs. Or, if that doesn’t interest you, look in a less expensive area or location.
• Purchase a home with income potential.  A home doesn’t just have to cost you money; it can also make you money. You could purchase a two-family home or duplex and rent out one side to generate income. Or, if you want to get creative, purchase a multi-family home with another family. If you’re a single home buyer, consider taking in a roommate.
• Look into an adjustable-rate mortgage. Unlike a fixed-rate mortgage that offers the same interest rate for the life of your loan, an adjustable-rate mortgage (ARM) starts with a low introductory interest rate for a few years (depending on the mortgage you choose). After that introductory period ends, your rate will be subject to annual adjustments depending on prevailing rate conditions. So, the lower introductory rate an ARM offers for the first few years could help you afford the home you want now. If rates increase after the introductory period, your rate could rise and your payments could increase significantly. You can, though, refinance to a fixed-rate mortgage if you’re uncomfortable with your interest rate potentially rising.
• Improve your credit.  If you feel like everything in personal finance goes back to your credit, you’re not wrong. The higher your credit score, the better the interest rate you will get, which can save you a lot of money. You can boost your credit score by paying bills on time and paying down debt you have.

Ready to move forward with buying a home? 
With some adjustment to your home-buying plans and a little creativity, you can manage rising rate and realize your dream of owning a home. Contact any of our Mortgage lenders to learn more about making your homeownership dreams a reality.

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Subject to credit approval. Terms and conditions are subject to change. Speak to an officer for details.