The rise in home loan interest rates is widely viewed as Culprit One for the national nosedive that housing market sales have been taking. No surprise there: when mortgage rates more than double, a number of dominos fall for the 68% of U.S. homebuyers who count on financing to acquire the home they are buying. They—including the West Palm Beach homebuyers who are among them—face the additional headwinds fostered by the combination of a battered stock market, continuing high inflation, and its resulting cost-of-living increases.
No wonder that many a household budget is strained to the limit. The Economists’ Outlook blog quotes NAR®’s Nadia Evangelou that “people need to earn $40,000 more in order to afford the median-priced home compared to a year earlier.” For West Palm Beach homebuyers at the higher end, that figure is proportionally larger.
Meanwhile, expectations have been building that home loan interest rates are on course to rise even further. Per NAR’s Chief Economist Dr. Yun, “the Federal Reserve is unlikely to let up on its aggressive monetary policy.” Everyone knows what that means.
All this acts to add time pressure for would-be West Palm Beach homebuyers to decide whether this is a reasonable time to start house-hunting. In recognition of their situation, earlier this month, The Washington Post offered “6 Big Answers” for home buyers “now that interest rates are soaring.” Here’s a condensed version of their questions and answers:
6 Answers for West Palm Beach Homebuyers
- Do higher interest rates make it harder to qualify for a loan? Yes.
- Does the accepted wisdom remain that my monthly payments should max at 28%-30% of my pretax income? That depends on your circumstances: your income and expected discretionary spending will frame your answer.
- Can I get a lower interest rate? If you have cash for a larger down payment, you can “buy down” the rate.
- If I use cash from my retirement account, what penalties will I pay? Details vary, but it’s a course that’s best to avoid because although you can borrow to buy a house, “you can’t borrow to fund your retirement.”
- Should I sell stocks to fund a house? It depends on how long you’ve held a security, but in general, “no one is advising draining savings and investments to get into a house.”
- Can I refinance later when interest rates come down? There’s no guarantee that rates will fall anytime soon, so avoid payments that are too high for comfort. That said, there’s a saying a real estate: Marry the house, date the rate. Eventually, a refi opportunity will arise (anyone remember the 18% rates of the ‘80s?)—but you don’t want to get yourself into a financial bind in the meantime.
Contact America’s Mortgage Solutions Today!
West Palm Beach homebuyers can make canny decisions when they let their unique circumstances serve as the basis for a course of action. Call me anytime at (561) 316-6800 to discuss the properties that are coming onto our West Palm Beach market!
Do you know how much home you can afford?
Most people don’t... Find out in 10 minutes.
Get Pre-Approved Today
