Daily Local News (West Chester, PA)

How to adjust your buying approach as mortgage rates, selling prices rise

- By Jeffrey M. Ruben

There is no question about it. We are in a different homebuying environmen­t than we were even six months ago.

Mortgage interest rates continue to rise and have now exceeded pre-pandemic levels, while home prices have stayed high amid continued competitio­n. In some cases, potential homebuyers have been priced out of the market.

However, for those still able to stay in the mix for a new home, there are a couple adjustment­s you can make now to help you compete for and finance a new home.

Adjust your buying power expectatio­ns

While getting pre-approved for a mortgage is imperative to accurately assessing how much home you can buy, take note of the amount and rate you are pre-approved for, and how long that pre-approval is valid, in case the rate changes during your search.

The good news is that mortgage rates are typically ahead of the curve of the Federal Reserve’s rate increases, due to mortgage rates being more closely tied to 10-year Treasury yields.

Work closely with your lender to make sure you are clear on your rate and pre-approved amount to borrow, as well as types of mortgage options that work best for your budget, including convention­al fixed and adjustable-rate mortgages, FHA mortgages and first-time homebuyer programs.

Seek out financial assistance

When mortgage rates were at their lowest, some buyers were able to keep their monthly payments down while still not applying a 20% down payment because the low rates helped offset monthly costs like Private Mortgage Insurance (PMI). PMI is typically applied to a mortgage by the lender to minimize the risk of providing a loan without as much collateral (cash) from the borrower.

This allowed buyers to hold back some of their cash with smaller down payments to use for move-in expenses and remodeling, or for buying more home.

Now, the combinatio­n of higher rates and prices culminates into a higher monthly payment before PMI is even factored in, requiring higher down payments.

The good news is there are local, state and federal programs to assist buyers. Lenders also offer resources such as down payment grants and other programs for some homebuyers and locations. Always check with your lender about programs and additional financial resources that may be available, especially for first-time and low-to moderatein­come buyers.

Also, check with your employer about any homebuying assistance they may offer employees.

Stay where you are

If you are a current homeowner who was trying to upgrade, now may be a good time to recalibrat­e your approach. While inflation is still a factor on supply and demand for building materials, your home’s increased value may provide new options to use your equity for a cash-out refinance to fund a remodel or make a large purchase to build your back yard oasis or enjoy your time away from home in new ways, such as a camper or boat.

Whichever direction you choose in your long-term approach to home ownership, speak with your lender and local realtor to help assess options and make an informed decision for how to best use your financial resources.

Jeffrey M. Ruben, president, WSFS Mortgage, joined WSFS through its acquisitio­n of Array Financial, a full-service mortgage banking organizati­on, and Arrow Land Transfer in August 2013. Ruben formed Array and Arrow in 2005, having previously held senior executive roles at financial and legal institutio­ns.

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