What to Know About Home Loan Interest Rates
FHA Loan Rates Will Change
The rates you see today are always subject to change. Some market watchers had predicted that by the third quarter of 2023 (July through September), the housing market would be in or about to begin a recovery from the bidding wars of 2022 and higher mortgage rates.
It doesn’t appear that rates are recovering as hoped in early July, but it is too early in the third quarter (at press time) to make a call.
Will rates go lower? There are too many variables at present; the most definitive answer is, “Wait and see.” Some may be able to do so. This is a good position to be in.
Others cannot wait for housing and have to apply in current market conditions. The next piece of advice is key for those who can't wait.
Lower Your Debt Before Applying for a Mortgage Loan
If your debt ratio is too high and your income is taken up by more bills than the lender would like, you may risk being denied a mortgage. Lower your debt ratio as far in advance of the loan as possible.
You might be approved for a home loan depending on the lender but at a higher interest rate. To avoid complicating your application this way, try to lower your outgoing debt as much as possible before applying.
No, the interest rate is not determined by the amount of your debt. But a higher rate may apply if your lender feels you are a higher risk. Debt above a certain threshold may equal more risk in the eyes of your lender.
Consider the Cost
Higher interest rates make it harder for people to qualify for a home loan. That indirectly puts a bit of pressure on the seller.
When the seller gets multiple offers, how many of those offers might result in loan approval and, eventually, the sale? Higher interest rates could motivate your seller to lower the price of the home, but you will need to put on your negotiator’s hat to discuss the option.
If your seller worries about higher rates making it harder to qualify for a loan, that could be your leverage to discuss a lower price. No, the lower price won’t totally offset the higher interest rate, but every little bit helps.
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