The question on everyone’s mind for quite some time was “when is the Federal Reserve going to raise interest rates?” We’ve been asking that question for about 6 ½ years. As it turns out and I’m happy to report, our decision makers at the Federal Reserve Bank that meet 8 times a year aren’t doing it in a Frat House type of environment, flipping a coin on what direction to go. After recently listening to the President & CEO of the Federal Reserve Bank in Chicago we can be assured that there is a little more to it than that. There is a number of determining factors that go into this decision, but how it affects you when deciding to purchase a home is what we want to go over.
The only thing we can be certain of is that interest rates will go up. We have all become very accustomed to seeing these low rates but the operative word is “historical” lows. To some extent this all becomes relative and we adjust just as we did when gas prices soared and stock values fell.
Higher interest rates may impact the price range of homes in which you have been considering, however being prepared for that will assist you when you are ready to make an offer. If you are obtaining a pre-approval you might ask your lender to look at a maximum interest rate along with a maximum loan amount. Keeping this “maximum” rate in mind will be helpful in case you don’t end up making an offer right away. You will always have the option to put money toward a down payment to compensate for a higher rate – having a safety net may be a benefit.
In the end, planning ahead will serve you well.