Can you afford a home despite rising mortgage rates?

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Mortgage rates have been going up, up and up in 2022, making homeownership more costly — even if house prices level off. In fact, consumers may be in for serious sticker shock when preparing to buy: In June, mortgage rates posted the biggest weekly increase in 35 years.


With high rates and skyrocketing home prices painting a gloomy picture of home affordability, many consumers may assume homeownership is out of reach. But, a look back at historical mortgage rates may shed some light on “high” rates — and put some pep back in their homebuying step.


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What rate is considered ‘too high’ to afford a mortgage?

“There is no one set rate that is considered ‘too high’ when you’re buying a home,” says Jacob Channel, LendingTree senior economic analyst. “Instead, the answer will depend on how much money an individual homebuyer can afford to spend on their monthly housing payments.”


Rather than focusing solely on mortgage rates, homebuyers should explore their budget to see if there’s enough room to cover all expenses after adding a mortgage payment. If the rate and payment leave you with the money needed to maintain your lifestyle and financial goals each month, then the rate may be acceptable.



Things to know:  Don’t rely on a mortgage pre-approval to decide how much you can afford. Some loan programs allow you to borrow up to 50% of your gross income — known as your debt-to-income (DTI) ratio — and lenders often pre-approve you up to the maximum. Keep in mind: Lenders don’t consider monthly expenses like utilities, car insurance, groceries, home repairs, cable or cellphone bills. As such, a maxed-out pre-approval could result in you owning a home that puts the squeeze on your monthly spending.

Have mortgage rates been this high before?

The quick answer is yes — and they’ve been much higher throughout history.


Today’s rates are certainly much steeper than they were a year ago, when they ranged between 2.70% and just over 3%. They’re also higher than they were throughout most of the 2010s, when rates for 30-year fixed mortgages generally hovered between 3.45% and 4.87%.


Getting a mortgage rate in the mid-5% range may be jarring after the nonstop news about interest rates below 3% for most of 2020. But before the Great Recession of 2007-09, rates close to 6% were the norm.


Things to know: It might be difficult to believe, but in the early 1980s, the average interest rate on a 30-year fixed mortgage rose to a record high of 18.63%. At first glance, that might look like a credit card rate, but it was the rate homeowners paid during an unusual period of high inflation.

How do consumers decide if homebuying is worth it now?

“Would-be buyers should make their homebuying choices based on whether they can afford a monthly payment at today’s rates and whether they’re ready for all the responsibilities of becoming a homeowner,” Channel says.

Those responsibilities include paying for a late-night plumber visit or repairs on a leaky roof, or replacing an air-conditioning system that fails on a hot summer day.


One thing to remember about high mortgage rates, however: What goes up eventually comes down, and you probably won’t be stuck with that 30-year mortgage rate forever.


If — and more than likely when — rates eventually fall in the future, you can always refinance your mortgage to a lower rate.

Is it better to rent and wait until rates drop again?

Predicting mortgage rates is like predicting stock prices — they often rise and fall based on factors no one can see coming or going. And you might miss out on a great home at a good rate if you wait too long, Channel says.


It’s worth it to keep renting if you’re not ready to leap into homeownership responsibilities. A bonus: It may cost less to rent in some cases.


“Renting is also typically cheaper than homeownership — at least in the short term — and you shouldn’t feel like you’re necessarily missing out or wasting money if you chose to continue renting instead of buying,” Channel says.


This article originally appeared on and was syndicated by

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How to negotiate a house price: 7 tips


Finding your dream home is a big achievement, but it’s still just one step in the homebuying process. Negotiating house prices is a common reality for both buyers and sellers, but doing so correctly is a bit of an art and a bit of a science.


Fortunately, there are some tried and true tips for negotiating home prices, such as coming armed with knowledge and making your offer in writing, that can make homebuying less expensive, not to mention less headache-inducing.


Whether you’re a first-time homebuyer or in the market for the second or third time, these strategies for negotiating house prices can help you score a primo property at the best possible price.


Related: 10 tips for
writing a real estate offer letter




They say knowledge is power, and that’s just as true in homebuying as it is elsewhere in life.


One of the best ways to get an idea of how much to offer is to research the prices of other properties in the area, particularly those similar to the one you’re after.


One way to do this is to work with a real estate agent, who will have access to the latest market trends in your area. But fortunately for us 21st-century dwellers, this information is readily available on public-access websites like Zillow, where you can see sale prices for many property types in a given neighborhood at the click of a button.


You can even filter for sold homes to see the final negotiated price of homes near your potential property, which can be an invaluable tool for figuring out how much you want to offer.


Zillow also lists how long for-sale houses have been on the market, which can give you some insight into how negotiable a list price may be in the first place. If the sellers have been trying to move the house for months, they might be more likely to seriously consider a lower offer than sellers who listed the house last week.


While a home inspection might not be required by your mortgage lender—and while forgoing one may make your offer more appealing to the seller—it’s still probably in your best interest to require one. A home inspection can go a long way toward ensuring you know exactly what you’re getting.


Without a home inspection, the only information you have about the house comes from what the seller is able (or willing) to disclose and what you perceive with your own senses. Home inspections can reveal deeper, hidden issues like cracks in the foundation or unexpected plumbing issues.


Along with helping you plan for unforeseen repair costs ahead of time, the inspection can also give you leverage to ask the sellers to knock down their price a bit, offer you a credit for closing costs, or fix the problem themselves.


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Sellers are apt to feel most enthusiastic about buyers whose serious interest is backed up with a mortgage preapproval letter — which, importantly, is different from prequalification.


While both involve a lender taking a peek at your financial information, such as income, credit history, debts, and assets, a preapproval involves a more in-depth application and verification process, and thus carries more weight than prequalification.


TL;DR: Having a preapproval letter is a great way to send your offer to the front of the pile.


If you’re already a homeowner looking for an upgrade (or lateral move), selling your old home ahead of time could be a mark in your favor from the seller’s perspective: It means you’re “chain free,” and won’t have to wait until your home is sold to go through with the buying process. (If you’re a first-time buyer, you’re ahead of the game in this respect!)


Of course, this chain-free approach requires careful timing and possibly setting up a temporary living space. So while it’s not feasible for everyone, it is an option to keep in mind if you’re hoping to increase your odds of success in a very competitive market.


You don’t want to insult the sellers by pitching a price that’s too low, particularly if you’re negotiating in a seller’s market or purchasing a beloved property that’s been in the family for years.


While you may be able to get as much as 10% off the list price, depending on the local housing economy, you could knock yourself out of the running if you lowball too hard. And in some hot housing markets, you may even end up bidding more than the list price on a house (if you’re committed enough to do so, that is).


monkeybusinessimages / istockphoto


On the other hand, you don’t want to shortchange yourself by failing to negotiate at all. Starting from the first time you walk through the home, don’t reveal all your cards by appearing overeager, even if you’re totally in love with the place.


If you come across as desperate for the house, sellers may feel they can expect a higher offer from you.


Don’t be afraid to point out the drawbacks that give you pause, and be sure you actually give yourself time to shop around before you get serious about putting money on the table. After all, we are talking about probably hundreds of thousands of dollars.


When it comes time to negotiate, consider not only the list price but the costs associated with the purchase itself. Closing costs can drive up the final price tag by thousands, and that’s not to mention any repair or renovation expenses you’ll face after the purchase. Keep all of those factors in mind when you’re crafting your offer.




Rather than making an off-the-cuff verbal offer on the home price, many experts recommend putting your offer in writing, and adding as much detail as possible. That way you avoid any unnecessary disagreements on what was actually said, and you also have the opportunity to make your offer complete, concise, and clear.


Making an offer in writing gives you the opportunity to negotiate on several factors, not just home price. For instance, if you’re able to pay for a home in cash, the seller might be willing to take a lower offer, but form of payment is a separate term from price itself, and an offer letter means you can spell that intention out explicitly.


If you’re taking out a loan, you can also attach your written pre-approval to the letter to prove your financial readiness to go forward.


You might also consider adding a personalized cover letter to your offer, which might sound cheesy—but selling a home can be just as emotionally fraught as buying one.


Adding personal touches about why you love the house or how you imagine your family growing with the property can help your offer stand out from others, even if you aren’t the highest bidder.


FabioBalbi / istockphoto


Although you’ll generally hear back on (realistic) offers within a few business days, sellers aren’t legally obligated to respond to your offer at all—and whether or not you win the bid, it’s nice to know where you stand.


After all, if the deal falls through, you’ll need to revert to Plan B … or get back to shopping around, if you didn’t have a second-choice house lined up.


By including an expiration date, you’ll have a firm calendar date on which you’ll know for a fact you didn’t get the home, which means you’ll be able to redirect your efforts. Purchasing a home can take a long time. There’s no reason to waste your energy when it’s a moot point.


Gerasimov174 / istockphoto


Negotiation goes on in love and war, in a salary decision, with parents and toddlers, and in real estate. When negotiating home prices, it’s best to play your cards close to the chest, limit lowballing, introduce a prequalification letter, and put an offer in writing with a deadline.


As important as it is to shop around for the right home—and negotiate it to the right price—it’s also important to find the right mortgage.


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