Mortgage rates are growing with each month in the U.S., forcing homebuyers to make bigger monthly payments in 2022. How can one combat these high mortgage payments? Let’s discuss a few tips and tricks.
Mortgage Rates Soar
Although a 30-year fixed mortgage is still one of the most popular choices for homebuyers, even that plan isn’t the most profitable nowadays. In the past 14 years, the rate on that particular mortgage payment plan has been the highest, according to a popular survey. That said, the monthly payment on an average mortgage will be up to $900 higher in 2022 than it was at the same time last year, according to George Ratiu, a senior economist with Realtor.com. In a year, that sum is predicted to grow up to $10,000. As for the average rate on a 30-year fixed mortgage, the percentage rose to 6.29% from 6.02% in just a week, according to Freddie Mac. Just a year ago, it was less than 3%.
However, homebuyers can rest easy knowing that “while sales prices were still higher than a year ago, the growth moderated into single-digits, a clear sign that the exponential growth of the past several years has slowed,” Ratiu said. Nevertheless, buyers are scared of these high percentages. That’s why knowing how to battle high mortgage rates pays off in 2022. So what can the average buyer do to minimize these high mortgage rates? Whether it’s an old loan or a new mortgage, don’t be afraid to step up and use every opportunity you have to battle high mortgage rates.
Take Control Of Your Mortgage
First of all, it’s important to raise your credit score and pay off debt. As soon as the buyer can convince the lender that they’re qualified for a low-risk purchase, their rates will go down tremendously. A borrower’s credit score and the amount of debt they have are usually the top two things that the lender looks into. So, request a credit history from Equifax, Experian, or TransUnion to see where you stand as a starting point.
The next step for getting a lower mortgage rate is to consider a larger down payment. When putting down 20% or more, borrowers provide lenders with a sense of security. So, if you have some cash to spare, don’t hesitate to put it toward your mortgage. Naturally, it can provide you with smaller interest payments down the road. However, make sure to ask the lender if a bigger down payment will make a difference first. Another strategy includes buying mortgage points, which buyers can essentially purchase from a lender to drop their rate a bit. Mortgage points require a lender fee and are mostly sold in 0.25% increments.
Apart from paying extra, there are a few other ways to battle high mortgage rates, including looking into new construction, which became a hot issue during the pandemic. Now, as buyers lose interest in securing newly constructed homes, builders are trying to interest them at lower rates. Sometimes, it’s even within the 4% range.
Lastly, don’t be scared to compare different lenders, as they often have fewer customers nowadays. Look for the best deal and shop around — when they see you’re an interested customer, they’ll definitely battle for your money. At times, it can even come down to bidding, which can help buyers negotiate a lower rate!
Sources: CNBC, Realtor, Yahoo!Finance