Tips for Buying a Home Even When Mortgage Rates are on the Rise

We’ve all seen the news. Prices are rising everywhere, including mortgage rates. For those trying to purchase a home, this presents an extra challenge along with the already demanding real estate market like the one here in Denver, CO.

The harsh reality is that higher mortgage rates equal less purchasing power. What is purchasing power? It is the ability to afford a home within your budgeted monthly payment amount. Rates directly impact your monthly payment on the home you purchase. As rates go up, the amount of home you can afford goes down. A good rule of thumb is for every 1% increase in interest rates, your buying power decreases by about 10-11%.

For example, with an interest rate of 4.75%, your monthly payment on a $400,000 house would be around $2,087. But with a rate of 5.75%, to keep your monthly payment around the same amount ($2,101) you could only afford a $360,000 house. That is a big difference, especially in a competitive market. 

All hope is not lost, however. There are a few ways to combat rising mortgage interest rates and maximize your purchasing power. Check out our tips below:

TIP #1 – Shop Multiple Mortgage Lenders

Not all lenders have the same programs…or rates.

How can that be? While interest rates are determined by the national and global markets, different lenders have different costs associated with running their businesses, things like overhead, closing costs, salaries, and other factors.

In 2018, Freddie Mac conducted a study to find out how much money borrowers potentially leave on the table when they don’t shop around. For a typical $250,000 mortgage, a borrower who got one extra rate quote saved an average of $1,435 over the life of the loan, according to Freddie Mac. If they took that a step forward and got a quote from one additional lender, 80% of those borrowers saved between $966 and $2,086. 

Just like you would shop around for any contractor and get at least 3 bids, we recommend you do the same when buying a house.

TIP #3 – Buy Down Your Rate

A buydown is when a borrower pays an additional one-time charge in exchange for an interest rate lower than the rate they were offered for the entire loan term. The downside is that it is an extra chunk of money up front, but if your mortgage rate is lower, you will end up saving thousands more over the life of the loan.

Make sure you speak to your lender about this option. And in some cases, buyers are even having success asking sellers to buy down their rate for them. 

TIP #4 – Look for Deals & Incentives from Home Builders

We have already talked about the benefits of buying new construction homes, and here is one more. Many times, home builders have built-in promotions or special rates for financing your home purchase. 

For example, at BLVD Builders, we are currently offering a 4.875%* Fixed Rate Promotion on two of our most sought-after units: 

6131 W 28th Ct (Listed at $840,260)

6139 W 28th Ct (Listed at $850,260)

Both units are built with The Wynkoop floorplan, which features:

  • 1,860 Square Feet
  • Townhome
  • 3 stories
  • 3 beds + study
  • 2.5 Baths
  • 2 Car attached Garage
  • Rooftop deck with gorgeous mountain views
  • Fronts to pocket park
  • September move-in estimate

This fixed rate promotion is locked in with both of these units, which offers homebuyers peace of mind and incredible savings. 

Contact us if you have any questions about the above Denver townhomes for sale, or about purchasing power in the hot Denver real estate market. We look forward to helping you. Happy house hunting!

* 4.904% APR. All home lending products are subject to credit and property approval. Terms, conditions, and restrictions apply–see our sales team for details.

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