As expected, the Federal Reserve announced today, Wednesday, December 14, 2016, that it would be raising its short-term interest rate for the first time this year and only the second time since the Housing Crisis. The quarter of a percentage point increase from 0.5% to 0.75% is expected to result in an increase in mortgage rates as well, which means it will be more expensive to purchase a home.
The rate increase comes from what the central bank perceives to be a stronger economy than what it has seen in the past decade. When the economy shows improvement, the Fed will raise the rates to keep inflation in check.
How Will This Affect You?
Well if you plan on purchasing a home in 2017, you might want to act swiftly. According to Realtor.com data, interest on a 30-year fixed mortgage was 4.19%. It is expected to reach 4.5% to 5% by the end of 2017.
That is an added $35 to $96 on a monthly mortgage payment for a $250,000 home. So when you do the math, that can be anywhere from $400-$1,100 a year!
With home prices now surpassing the pre-recession highs, buying a home will become even more difficult.
So…What Can You Do?
Don’t be intimated! Focus on what you can control. Your credit scores and the amount you can save for the down payment is very important and will affect how much you can borrow as much as the interest rates. That’s the number one thing we advise all our clients looking to buy a home, but are unsure where to start.
So when the time is right, or if you’re just curious about the steps needed in order to purchase a home, don’t hesitate to reach out! We are here for you!
Article Written by Bryan Suarez