Get Smart With City Chic is a bi-weekly column giving you the real talk rundown on what’s happening with the D.C. real estate market. Sponsored and written by Lindsay Dreyer, the broker/owner of City Chic Real Estate.
Unless you’ve been hiding under a rock, you’ve probably seen the news that interest rates have gone up significantly since the spring. But what does that mean for buyers in today’s market? It’s hard to separate fact from fiction when it comes to buying a home, and in particular, getting a mortgage. So, what role do interest rates play when it comes to your purchasing power?
Simple answer: interest rates directly correlate to your monthly mortgage payment, so when interest rates rise, so does the monthly payment for your home loan.
How are interest rates determined?
Contrary to popular belief, the Federal Reserve does not directly determine mortgage interest rates. Mortgage lenders base interest rates on the current market, plus a markup that represents the lender’s profit. This is why you’ll see rate fluctuations even though the Federal Reserve hasn’t made any rate changes.
Do all mortgage lenders charge the same rate?
No! Each lender charges different fees and interest rates, which is why we encourage all our clients to speak to 2-3 different lenders.
Should you buy now or wait for rates to go down?
I wish I had a crystal ball so I could tell you what’s going to happen with home prices and interest rates! We are exiting a period of time where we had historically low interest rates. My guess: we probably won’t ever see interest rates in the 2’s again. However, if you want to buy a home, can afford your mortgage at current interest rates, and have a long term game plan, I don’t think there’s a reason to wait. If rates go down, you can always refinance.
It’s not all bad news
We had record-breaking demand for homes the past few years, and it was tough out there for buyers. We’re seeing things start to ease, and a reprieve from insane bidding wars is a welcome change! That isn’t to say bidding wars are gone completely, but it’s definitely feeling less frenzied.
The Bottom Line
No one can time the market perfectly, not even real estate agents. If you’re ready to become a homeowner, now is as good a time as any to take the plunge. Especially if you’re in a stable spot. Don’t let the news about rising rates scare you away!
City Chic Real Estate is a woman owned, independent real estate company, specializing in helping first time buyers and sellers in the DMV. Book a no pressure, intro call with our team at citychicre.
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