The housing market is starting to slow amid higher interest rates...but people are still out looking.
CNN's Brian Todd talked to some experts about how prospective home buyers can navigate in this current economy.
Dana Burns got some sticker-shock recently, when shopping for a new house in the phoenix area..
“500-thousand dol- I don't think so. I know not,” said Dana Burns a recent house hunter in Phoenix.
Dana's certainly not alone, in navigating higher home prices and steeper mortgages.
At the end of 2021, 30-year fixed-rate mortgages in the US had interest rates of only about 3%. Now the rate is approaching about 6% and with the feds' interest-rate hikes just announced, getting a mortgage could cost some home buyers, hundreds of thousands of dollars more.
"For an average home buyer, it could cost upwards of six-figures, more than $100-thousand over the course of a 30-year loan today, versus if they had purchased perhaps six to seven months ago," said Bill Kowalczuk, Real Estate Broker, Coldwell Banker Warburg.
What's the first thing a prospective home-buyer should do right now, as interest rates climb?
"The first thing you ought to do is sit down and look at all your debts. Because before you go look at the house, before you fall in love with that house, look to make sure you can handle that payment,” said Michelle Singletary, Personal Finance Columnist for The Washington Post. “And here's something else that I'm going to tell you that a lot of people don't tell you: don't go by what the bank says that you can afford. 'Cause they're gonna look at your gross income. They're gonna look at all your debts and they're gonna look at your gross income. But guess what? You don't take your gross income home."
Most financial experts advise putting as much money down for your home as you can.
One key component home buyers have to navigate: whether to get a fixed-rate mortgage of 15 to 30-years with an interest rate that never changes. Or a so-called 'arm': an adjustable-rate mortgage, with interest rates that go up and down depending on the markets, and when the government raises or lowers rates.
"If you think that you'll be there for less than 5-years, an adjustable-rate mortgage would definitely be the way to go, because it's a lower monthly payment. If you think you're going to be staying longer than 5-years, a 15-year or a 30-year mortgage would be great. It just depends on what monthly payment you're able to carry," said Kowalczuk
With mortgage interest rates climbing, is now even a good time to buy? Our experts are torn.
"Renting does not mean that you are a financial failure. Renting in an environment where we might have a recession will allow you to pick up and maybe move where the jobs are," said Michelle Singletary/Personal Finance Columnist, The Washington Post.
"If you are able to make a down payment and qualify for a mortgage, it will cost you less to own that home than it would be to rent the same property," said Bill Kowalczuk/Real Estate Broker, Coldwell Banker Warburg.
"What's a common mistake people make, when taking on a new mortgage, buying a new home? One expert we spoke to says, many people simply buy too much house... overestimating the affordability of their mortgage, not factoring in the maintenance costs of the house,” said Brian Todd, CNN Washington.