Home Loan Advice in an Era of Rising Mortgage Rates
August 15, 2023
Some borrowers look at home loan interest rates in 2023 and choose to wait and buy a house later. But some borrowers don’t have the option to wait.
Changes in a career, family size, natural disasters, and other variables can complicate a homebuyer's plans, forcing the borrower to act sooner than they wanted to. What’s a borrower to do if they need to buy a home and rates are still historically high?
The San Francisco Gate, better known as SFGate.com, discusses a very old piece of mortgage advice relevant to the current mortgage rate environment. That advice comes in the form of an old adage.
“Date the rate, marry the house” is an old saying that means, “If you’re forced to buy now, don’t sweat the interest rate. Instead, buy the home with a plan to refinance once the rates are lower.”
This is sound advice, but this is a strategy that requires a bit of planning.
Why? Because refinancing a home loan, even a low down payment FHA mortgage, typically requires a new appraisal and credit check unless you are applying for an FHA streamline refinance loan.
In those cases, the lender can approve the loan without the credit check or the appraisal.
That means you’ll want to approach the refinance the same way you did the original purchase loan in terms of working on your credit, lowering your debt ratio, and getting your credit card balances paid down to below the halfway point wherever possible.
Refinancing into a lower rate also includes closing costs. Borrowers may choose to finance approved closing costs, but if you buy a home with an FHA purchase loan knowing you’ll refinance later, it’s smart to save a little for those costs every month until it’s time to apply for the FHA refinance loan.
Financing the closing costs, even if you’re just financing FHA mortgage insurance, means your monthly mortgage payment will be higher than if you paid those costs in cash.
If your goal for refinancing the mortgage involves lowering your monthly payment, don’t finance the closing costs.
Buying a home with the goal of refinancing later into a lower rate is not an impossible dream. Many borrowers consider this strategy, and it’s important to have expectations properly managed going into purchasing a home.
What do we mean by this? In this context, borrowers should not expect mortgage rates to change overnight, nor should they expect them to drop back down to historic, pre-inflation lows rapidly once the rates start returning to something closer to normal.
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RELATED VIDEOS:
Annual Income Requirements for FHA Loans
Good Credit History Helps Get FHA Loans
Stay Informed About Your Mortgage Closing Costs
Changes in a career, family size, natural disasters, and other variables can complicate a homebuyer's plans, forcing the borrower to act sooner than they wanted to. What’s a borrower to do if they need to buy a home and rates are still historically high?
The San Francisco Gate, better known as SFGate.com, discusses a very old piece of mortgage advice relevant to the current mortgage rate environment. That advice comes in the form of an old adage.
“Date the rate, marry the house” is an old saying that means, “If you’re forced to buy now, don’t sweat the interest rate. Instead, buy the home with a plan to refinance once the rates are lower.”
This is sound advice, but this is a strategy that requires a bit of planning.
Why? Because refinancing a home loan, even a low down payment FHA mortgage, typically requires a new appraisal and credit check unless you are applying for an FHA streamline refinance loan.
In those cases, the lender can approve the loan without the credit check or the appraisal.
That means you’ll want to approach the refinance the same way you did the original purchase loan in terms of working on your credit, lowering your debt ratio, and getting your credit card balances paid down to below the halfway point wherever possible.
Refinancing into a lower rate also includes closing costs. Borrowers may choose to finance approved closing costs, but if you buy a home with an FHA purchase loan knowing you’ll refinance later, it’s smart to save a little for those costs every month until it’s time to apply for the FHA refinance loan.
Financing the closing costs, even if you’re just financing FHA mortgage insurance, means your monthly mortgage payment will be higher than if you paid those costs in cash.
If your goal for refinancing the mortgage involves lowering your monthly payment, don’t finance the closing costs.
Buying a home with the goal of refinancing later into a lower rate is not an impossible dream. Many borrowers consider this strategy, and it’s important to have expectations properly managed going into purchasing a home.
What do we mean by this? In this context, borrowers should not expect mortgage rates to change overnight, nor should they expect them to drop back down to historic, pre-inflation lows rapidly once the rates start returning to something closer to normal.
------------------------------
RELATED VIDEOS:
Annual Income Requirements for FHA Loans
Good Credit History Helps Get FHA Loans
Stay Informed About Your Mortgage Closing Costs
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