The American dream of homeownership could become less affordable in the near future. For those lucky enough to afford a home, the purchase is an important milestone. Most Americans will never make a more expensive purchase, and most buyers must borrow money to afford a house — which means applying for a mortgage.
The frequently lengthy process of applying for a mortgage and buying a home involves numerous steps, including verifying financial and employment status, spending habits, hiring a lawyer, inspectors, and so on. One key factor is the interest rate on the loan. This rate determines the cost of the mortgage, that is the monthly payments and the years it would take to pay it off. Low mortgage rates tend to encourage home buying, while higher rates may discourage some buyers.
While prospective homebuyers should make their own decisions based on their own circumstances, they should consider that the Federal Reserve has been raising rates and confirmed more rate hikes are on tap in 2017 and 2018. With the Fed raising its benchmark interest rate, banks will likely follow suit and mortgage rates will also rise. Still, although interest rates are off all-time lows, they remain extremely cheap by historical standards.
The question is: should homebuyers act soon?
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