Mortgage rates have seen a low as the year 2018 came to a close. Low rates help many borrowers qualify for a loan, making the housing market boom. Are these low rates here to stay or is this another quick fluke?
Fannie Mae and the Mortgage Banker’s Association have predicted that interest rates will rise throughout 2019. The good news is that they won’t rise at rapid rates, though. While the second quarter may see similar low interest rates as the first quarter, as the year progresses, interest rates may rise slightly.
What Will Home Prices Do?
As interest rates rise, home prices may continue to slow down on their steady climb. What it really depends on is the market. The demand for housing and the ability of borrowers to get financing will determine what happens to home prices.
How You Can Get Low Rates
Despite the potentially rising interest rates, you can still maximize your chances of securing a low interest rate:
- Maximize your credit score – Do what you can to increase your credit score as much as you can. Paying your bills on time is a must. You should also make sure that you don’t have too much revolving debt at once. You want to keep your revolving debt at 30% of the total credit limits available to you.
- Put money down on the home – Lenders like you to have a little ‘skin in the game.’ In other words, they want you to have your own money invested in the home. While you can make a minimum down payment, such as 3.5% for an FHA loan, you should try to put down as much as you can in order to lower your risk of default. This will help you get a lower interest rate.
- Have steady income – Lenders like to see you have a 2-year employment history at the same employer. This shows reliability and stability on your part. If you have had several jobs over the last 2 years, it can make lenders nervous. They don’t know if you’ll still be employed and making enough to cover the cost of the mortgage. This could leave you with a higher interest rate than you desire.
If you worry about what interest rates will do in the near future, consider getting preapproved for a mortgage now. This way you know what you can afford and can start shopping for a home soon. If you can afford today’s interest rates, consider making your commitment sooner rather than later to avoid the risk of rising interest rates. If interest rates do rise, try to make sure that you do what you can to lower your risk of default in the eyes of the lender in order to ensure that you get the lowest interest rate possible.