How to Navigate Higher Interest Rates as an Acreage Home Buyer

Yes, interest rates are higher than they’ve been in (a few) years. But should higher rates prevent you from moving forward with buying a home?  

Maybe, maybe not. 

As I always say, the best time to buy a home, whether you’re buying your first home or your 10th home, is when it makes financial sense for YOU – regardless of what everyone else is doing, regardless of what the market is doing, and regardless of interest rates. 

Just like investing in your 401k – you are building wealth for the long term so you don’t necessarily check on the stock market performance EVERYDAY for your 401k account. Of course you won’t let the stock market fluctuation keep you from saving for retirement.

Buying a home is similar to that. You are investing in your future almost in the format of a forced savings plan (paying mortgage and building equity) every month, and you do it when it makes financial sense for YOU. Plus, there are some great options out there to still “win” as a buyer in this market!

Now’s a Good Time to Evaluate

If you’ve read my article How To Go With The Flow Of The Market, you’ll understand that now, around the winter holidays is a particularly slow time for real estate transactions as most people are preoccupied with party planning. It doesn’t mean that you should totally put your dreams behind – rather, take some time to think and plan for the upcoming year can give you so much clarity. You’ll have a better understanding of what is best for you, your homeownership goals, and your financial situation.

Read along and you’ll be all set for when the new year begins and for the spring housing market.

Wait It Out or Move Forward?

If you’ve been thinking of buying an acreage home, then you need to consider what is the best decision for you – whether to wait it out to see if rates decline and prices adjust, or move forward with a purchase.

Take the time to read the bulleted list below to jumpstart your thinking and see where most of your answers tend to lean toward. Don’t hesitate to reach out to me to discuss your particular situation, where I can provide more insight.

• Know how long you plan to live in your next home. If you plan to live in your next home for more than 5 years then moving forward with a purchase could be an option since it makes more financial sense over the long term where you could see rates drop again to refinance. If you’re not sure how long you plan to live in your next home and it’s not urgent, then it’s better to wait to see if rates and/or prices decline in the next 6 months or more.

• Feel secure with your income, credit score, and general financial situation. To get the best interest rate available, you’ve got to have your financial house in order. If you have a stable job, steady income, and good credit, you’ll have the most loan programs and interest rate options available to you. If it makes sense to wait until one or all of these factors have improved, then wait! Just don’t be in the dark – know your options based on what your situation is now and what it could be in the future to make an informed decision about what waiting will do for you. 

• Focus on your monthly payments, not the interest rate. Demand is lower, so prices aren’t soaring like they did this time last year (and 2 years ago). Some areas are even seeing price reductions. That means even though interest rates might be higher than they were last year, the price you pay for a home might be lower. Remember a portion of your monthly payment goes to the equity of the home!

• If you’re a first-time buyer currently renting, consider the pros and cons of paying higher rent compared to a higher mortgage. What’s better for you – higher rent or a higher mortgage payment – even if it’s the same amount? Rising rents have made it tough on renters (who don’t have much control on that) so think hard if you want to get into the market sooner with your own home. You can enjoy not only stable housing payments, building equity in your home, but also the tax benefits of being a homeowner, all of which you’ll never receive as a renter.

• If you’re a current homeowner, focus on the big picture. Many homeowners who need to move are feeling like they “lost out” on a price they could have gotten a few months ago and are talking themselves out of moving because of that. Your reason for moving needs to be more than just what your home is worth – that’s the case no matter what the market is doing. Look at it this way – if you are selling, you likely are also buying a new home to move into. If you are worried about your current home having lost value, guess what, so will the home you are moving into – you’ll be breaking even. 

Buying Strategies for Today’s Market

If you think you’re ready to move forward with purchasing a home in the coming months, then you need to be a smart buyer with some smart strategies under your belt. Whatever the reason is for moving, whether it’s a new job, expanding family or some other life change that just can’t wait, I have some ideas and tactics for buying an acreage home in today’s market:

• With less demand, it’s more of a buyer’s market so up your negotiation tactics and take advantage of not feeling rushed in this market to beat out other buyers. You might be able to negotiate a lower price, agree to some concessions from the seller (such as paying for your closing costs or credit towards your interest rate), negotiate an inspection and even the seller doing repairs. We haven’t seen terms like these for buyers in YEARS.

• Getting into the market now can be a plus since you’ll avoid bidding wars and competing with more buyers. If you are waiting until interest rates decline to buy a home, so are many other people. But, you can outsmart them by buying before rates drop and being able to negotiate better terms before demand increases. Plus, you could possibly refinance if and when rates do lower (all at the same time of having a stable payment AND building equity). Note refinancing comes with a cost, and sometimes it won’t be a cost out of pocket cost if you choose so.

• Shop around for a mortgage to find a lender that can work with you and offer solid loan options. It’s definitely not a “one-size fits all” lending market right now. Lenders offer different rates, different loan programs, and different terms for 30-year fixed mortgages or 15-year fixed mortgages. Some lenders are offering interest-rate buy-down programs where you can pay a fee to have an interest rate that is lower than market value for a time. This can be a good situation for some buyers who want to grow into their mortgage payment. 

• Consider an Adjustable Rate Mortgage. Depending on how long you plan on living in this next home, one option could be an Adjustable Rate Mortgage (ARM). Some savvy buyers these days are opting for this as a way to lower their payments, knowing that they will most likely sell before the rate adjusts. There are even some long-term ARM options for people who are planning on living in their homes for a long time. ARMs nowadays are not as risky as they once were, and are definitely worth exploring depending on your situation.

• Consider “buying down” your mortgage by paying points at closing. This can reduce your mortgage rate and payment for a few years before it’ll return to original rate. You’ll have to pay 1% of the loan amount to be put into an escrow account at closing. Sometimes this can be funded by the seller, lender, or builder.

I’m Here to Help

As you can see, you’ve got a lot to think about when it comes to today’s housing market and determining what is best for you. Know that you shouldn’t try to figure all of this out by yourself, that’s what I’m here for! We can go over your particular situation to see if you should wait it out or come up with a strategy so that you can be ready to purchase a home sooner.

The earlier we meet up, the better since we’ll have an action plan in place. That way if rates and/or prices drop, we will know what steps to take at the get-go!