How to Know When to Jump on Low-Interest Rates

How to Know When to Jump on Low-Interest Rates

 

Related Blog: 4 Key Factors to Consider When Buying a House on the Florida Gulf Coast

When Should You Jump on Low Interest Rates and Start Looking at Homes?

If you see an interest rate that you think is low and you want to know when to start looking at homes, the first steps are to talk to the pros and research for your own financial situation.

Talk to a professional

One of the best ways to figure out if you can afford to buy a home is to talk to a mortgage professional. They will be able to take a look at your finances and your credit score and then give you an idea of where you should go from there.

He or she may be able to get you pre-approved for a loan so that you can see if you would be able to find a home in that price range that you would like with an interest rate that’s fair. 

If not, you may want to continue saving for a downpayment and working on your credit score so that you can buy the home of your dreams.

 

Do you have a downpayment? 

Before you go searching for homes, remember that most mortgage loans require a downpayment of up to twenty percent prior to getting a loan. You may be able to find a loan without a downpayment but you are going to end up paying more for it.

You may be required to pay private mortgage insurance every month until you pay off twenty percent of your loan. It usually is included in your monthly mortgage and is about one percent of your loan. This can really add up so it is a good idea to try to have a good downpayment before you buy a home.

 

How much you can afford to spend on a mortgage?

Even if you are pre-approved, find a home, or find a low interest payment, that doesn't mean that you should necessarily spend on a home. You might find yourself struggling to pay for the mortgage because you have to consider all of the other costs that are associated with owning a home. This may be the first time that you have to pay for electricity, phones, sewer, maintenance, and much more.

For this reason, you need to really decide how much you can spend every month, without feeling strapped. You are still going to want to have a few extra dollars each month to do something fun or you may start to regret your home.

 

When Should You Refinance?

Most people recommend only refinancing if you are going to get at least a half of a point lower than your current rate. This should reduce your monthly payment.

However, that isn't the only thing to consider. You need to figure out how much it is going to cost you to refinance. If you only save fifty dollars a month, it may take you a few years to recover the settlement costs. However, if you aren't planning on moving, it may be worth it for you.

You may also want to refinance if it can help you get ahead. Many people refinance when they have equity in their home as a way to pay off high-interest rate credit cards, buy a vehicle, make some repairs to their home, and much more. If you need some extra money, this might be a good option for you.

No matter what the interest rates are, it is important that you think carefully before you buy a home. You need to be ready before you start on the path to homeownership. Even with refinancing, you need to make sure that you are going to come out ahead. Otherwise, there is no point in refinancing.  

Contact us for all of your mortgage loan needs. We can help you decide whether or not you are ready to buy your first home.

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