Fed interest rate hikes: What to do if you're buying a home
NORTH TEXAS (CBSDFW.COM) – Debt just became more costly for consumers – whether that's auto loans, credit cards, and in some cases home mortgages.
As expected, the federal reserve on Wednesday raised short term interest rates by three quarters of a percentage point. It's the latest in what has been a string of aggressive rate hikes as the fed works to curb inflation.
For Carlotta Booker, it's a concern – but the rising interest rates can't quench her dreams of homeownership.
"It will mean that we will have a permanent place to stay," says Booker, "A place to call our own. A place that I could pass down to my daughter."
Booker admits to getting excited "just thinking about it. I can't wait. You're kind of nervous, though...about the rising interest rates."
And with good reason. The average 30-year fixed mortgage rate is now in the neighborhood of 7% – the highest it's been in some two decades.
"Money is more expensive," says Stephen Patterson, chief financial strategist with Keycity Capital matter-of-factly.
He then proceeds with some painful mortgage math – especially for those looking to buy and without a lot of cushion in the budget.
"So, a year ago, mortgage rates were approximately 3%," Patterson said. "To borrow $300,000 a year ago was about $1,265 a month. Today, that same note at 7% is going to cost you approximately $2,000 a month. So, $750 a month increase due to the rising interest rates."
Patterson's advice to everyone right now, whether house hunting or not, is to save as much cash as you can, and avoid using credit cards to cope with rising prices.
"I'm trying to not spend on frivolous things," says Booker, "And cut back and be mindful of the things I put on my credit."
It's all lessons Booker has learned while taking advantage of free online classes in homeownership that Dallas County offers to help get buyers ready.
"How to select a realtor, how to avoid foreclosure... credit repair, " explains Christian Grisales with Dallas County. "So, we cover a range of issues. That's why we invite Dallas County residents to participate, get educated and hopefully (work toward) owning their own home."
For those that complete the classes and qualify, there's also $7,500 available in down payment assistance.
"I feel prepared," says Booker. "I know what I need to do and I'm doing it."
Find more info about the classes here.