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Home Buyers: How Do You Rate Your Fear?
Buying a home is scary. That’s why many home shoppers take time to be sure they find the right place.
In 2018, however, fear may actually motivate some to hurry up and buy.
If mortgage rates begin to rise this year, as many economists predict, it could drive nervous buyers to seal a deal before any further increases.
“There have been instances in the past where rising mortgage rates create a short-term boost in demand for buying a home,” says Adam DeSanctis, of the National Association of Realtors, which is forecasting mortgage rates to reach around 4.8 percent by the end of 2018.
Of course, rates have remained stubbornly low in past years, despite some forecasts to the contrary.
But rushing to buy if rates do start ticking up above four percent – about where fixed rates for 30-year mortgages stood at the end of 2017 – isn’t a smart strategy, says Aner Sela, an associate professor at Warrington College of Business, University of Florida.
“If everyone expects interest rates to rise and many people want to buy now, demand goes up in the short run and so do prices,” Sela says. “Feeling pressured to buy a house now may end up being much more costly in the long run if it leads people to compromise things like house location, fit, or condition.”
Another reason not to fear, notes Selma Hepp, chief economist, Pacific Union International, is that if higher rates set in, home price appreciation should slow.
Given forecasts, however, anyone who plans to close on a home purchase, beyond the typical 30 to 45 day time period after applying for a mortgage on a specific property, should ask about paying extra for a “rate lock,” suggests Gibran Nicholas, of the CMPS Institute.
The lock then guarantees that the rate at the time of application will be the rate charged at closing.
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