The Fed just raised interest rates by .25%….so what implications does this have for home buyers? Aside from raising the rates that lenders will be offering, another effect on buyers is a 1% raise in your DTI (debt-to-income) ratio. While this may seem startling and may have some home buyers second guessing, don’t be alarmed.
First off, all things considered, current rates are still very favorable. There is always going to be sticker shock when you learn that a .5% raise equates to $80 or $100 more a month, but rates overall are still relatively low. Since the Fed cited inflation concerns, we could see a continual rise in interest rates, so now is a good time to buy. Secondly, while a raise does in in turn push your DTI ratio higher, it is not as high as you may think. That 1% can easily be offset by paying off credit cards.
Nonetheless, for those home buyers currently shopping the market, set a deadline now for when you’ll be closing escrow, sit down with your lender and determine all of your options before 2017, and lock in your interest rate as soon as possible.
As we’ve mentioned, November to December is the best time to buy for a number of reasons and, now, securing an acceptable rate is another motivating factor. If you’re seriously considering buying, the sooner you can make the move the better.