What the Federal Interest Rate Change Means for Home Buyers

Federal Interest Rate & Home Buyers Irvine CAHow will the Federal Reserve Board’s hike in interest rates affect you?

The Fed promised us they would raise the short-term interest rate in 2015.  We assumed they meant in the beginning of the year, but we didn’t actually see them take action until mid-December of 2015.

How does this rate increase affect individual home buyers and sellers? Here’s a little guide for you to see what this change will mean for you.

When will this change begin to take effect?

It already has! Actually, the FRB’s rate is not for consumers, it sets a target for the federal funds rate, which is the rate at which banks borrow money. This is how it affects the consumer, indirectly though the banks they borrow from.

Wells Fargo raised their prime rate just 12 minutes after the announcement!

Mortgage rates were also going up before this change because those rates have more to do with long-term bonds than the federal funds rate, according to some experts.

Is refinancing an option still?

Since the housing crash, lenders have been more conservative about making loans to risky borrowers.  Credit has been pretty strict and those that qualify for a new mortgage probably already have done so.

The credit might loosen up, and create an opportunity for more refi’s so people can take advantage of historically low rates.  The Fed is letting on like they are going to raise the federal funds rate slowly over the next year.

But even if you qualify, think about a refinance logically. Talk to your lender to determine if it’s the most financially prudent move for you.

Will it be harder to sell a house?

Demand is still historically much higher than supply and rates are still relatively low.  So, in short, no.

The Most Important Things For Buyers to be Aware of:

-Finding the right mortgage is just as important as finding the right home

-Take your time and find different options in your local market, looking for the best loan products and rate terms.

-Do your homework on discount points, locks, and float-downs.

– Be aware of your credit scores, debt-income rate, and down payments.

Want more information about the interest rate hike and its effect on you? Contact Avis Lending in Irvine, California and Lahaina, Hawaii for all of your home loan needs!

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