Suze Orman has a warning for homebuyers worried about rising mortgage rates
Prospective owners don’t need to overreact to rising rates for a few simple reasons.
- Mortgage rates have risen, which may worry some potential buyers.
- Finance expert Suze Orman suggests that mortgages are still good business.
- She also recommends increasing your credit score to qualify for better rates.
During the COVID-19 pandemic, mortgage rates repeatedly hit new highs. This has created an unprecedented opportunity to obtain an affordable home loan.
Over the past few months, however, rates have risen steadily and are now well above what buyers saw last year. While the rising cost of borrowing may have some potential buyers worried about the price of their home loans, finance expert Suze Orman has an important warning potential homeowners will want to hear.
Here’s what Suze Orman has to say about mortgage rates
Orman addressed the issue of rising mortgage rates on his blog in 2017, when rates were also rising.
She said borrowing costs have already risen and are likely to continue to do so throughout the coming year, which is a situation similar to what homebuyers are currently facing. But, in light of rising rates, Orman said people considering buying or refinancing a home should “not overreact to higher rates.” Here’s why.
Mortgages are always good business
Orman listed a number of reasons why potential buyers shouldn’t be deterred from buying their homes by the threat of higher mortgage costs. The most important reason was that fixed rate mortgages remain a very affordable type of debt.
At the time she gave him advice, the rates were around 4.1%. Today, a typical homebuyer can still get a 30-year fixed rate loan for around 3.8%, so his advice may be even more relevant now. The basic fact is that while rates are higher than they were last year, they are still extremely low by historical standards.
Improving your credit can help you get better rates
Orman also pointed out that borrowers can take steps to qualify for the cheapest loans by improving their credit score. Here are some ways to do it:
- Pay off all the debts you have
- Ask your creditors to delete negative information if you usually pay on time
- See if someone near you can add you as an authorized user on a credit card
These and other steps can help improve your credit score, which can help you qualify for a better rate with a mortgage lender.
Keep an eye on the long game
Finally, Orman cautioned against being seduced by adjustable rate mortgages, which have lower starting rates that may look attractive as borrowing costs rise. But these mortgages carry the risk that rates will rise further since they are not locked in for the full term of the loan. Consider the overall cost of your potential mortgage and your long-term homeownership goals before taking out an adjustable rate mortgage.
Why Orman’s advice is important for homebuyers
Orman’s suggestion not to overreact to rising rates is important for anyone considering buying a home, as you don’t want to miss the opportunity to get into a property if you are financially ready to do it.
The fact is, no one can predict when or if rates will ever fall as low as they were at the height of the pandemic. Waiting in the hope of lower rates could mean delaying your home purchase for years, or even indefinitely. Also, property values could increase during this time, which will eventually make buying your home more expensive.
Ultimately, since home ownership can help you build wealth over time and put you on the ground, you shouldn’t let a slight rise in rates get in your way, especially when mortgages remain so affordable for many qualified borrowers.
A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage
Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.
Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.