It may be a decent time to buy a house… if you have good credit.
Quick note here on:
- The value of having a good credit score, and
- Why it is presently a decent time to buy a house.
Except for the past three months, interest rates have been moving gradually higher – ever so slightly higher – making mortgages slightly more expensive in terms of higher 15- and 30-year mortgage rates, versus one and two years ago. But with the slowing pace of interest rate increases – with rates for some borrowers FALLING in the past three months – there have been noticeable differences in the interest rate charged to a more risky borrower than to a borrower with strong credit.
Put another way: Lenders seem to be showing caution toward riskier borrowers. The Wall Street Journal this week cited rate increases on (riskier) variable-rate credit card debt versus rate decreases on (less risky) new car loans and mortgages for high quality borrowers with high credit scores.
All of this points to a window of time for a steady interest rate environment – that may stay open for a bit longer due to uncertainty about the sustained strength in the US economy.
Interest rates are still at historic lows overall. The Federal Reserve signaled a pause this week to their rising interest rates strategy. By using its “interest rate toolbox” the Fed responds to or anticipates the direction of the US economy. Presently, there is uncertainty about economic strength amidst a strong job market but possible slowing in retail sales.
Data from LendingTree.com was reported to indicate that amidst economic uncertainty, borrowers with higher credit scores had access to lower interest rates than did more risky borrowers with lower credit scores. Lenders are even competing for these less risky, higher credit quality borrowers! This state of affairs points to an opportunity for those with higher credit scores.
First, KNOW your credit score. Next, use the strength of your credit wisely. If a home purchase is in your future AND you have a good credit score, now may be a decent time to borrow the money to make a purchase happen.