Rising interest rates can be a bad thing for several reasons:

• Low interest rates are more beneficial for buyers than low home prices as far as affordability.
• Rising interest rates mean higher home costs.  The higher interest rates mean higher monthly mortgage payments, which means people can’t afford as much home. Combine this with rising home prices and the homes people can afford to buy are now changing.
• Some people may no longer be able to afford to buy a home. With the increasing rates and home prices, some marginal buyers will be knocked out of the market.
• Less people will be able to refinance, so those homeowners that are still underwater, and have not refinanced will not be able to get the great low rates that may help them keep them in their homes.

Are you getting ready to refinance your home or are you getting ready to purchase a home?  There are a few things that you need to put on hold if you are considering doing either in the near future.  Remember the bank is looking for someone with a stable income and a good credit history.  One of the biggest mistakes people make is to purchase a new vehicle just before applying for a mortgage or even worse after they have already started the process.  Banks see this as a big red flag and it may cost you the financing for your home.  Hard as it may be, unless you are paying cash, wait until your refinancing is done or you have closed on your home before buying that vehicle.  A few other tips – don’t apply for new credit cards or credit line increases, don’t do anything that involves having your credit score checked.  These may seem obvious, but many people forget all about this and end up in a real mess trying to get their financing pushed through.  The whole process will only take a few months, so unless an emergency situation occurs, exercise patience and leave your banking and credit alone to get your home refinanced or your new home purchased.  Check with your loan officer for more details on what you can and cannot do.

The demand for 15 year mortgages has been soaring with the record low interest rates.  Something to consider when your purchase or refinance your home is the 15 vs 30 year mortgage question.  Last week, 30 year mortgages were at 3.75% and 15 year mortgages were at 2.97% – a level never seen before since the start of tracking!  According to Freddie Mac, 31% of refinanced mortgages so far this year have gone with the 15 year mortgage.  Back in 2002, with an interest rate of  5.5%, 35% of refinanced loans were 15 year.  If you are buying or refinancing and can afford to spend several hundred dollars more a month, the 15 year mortgage at this low, low rates is really the best way to go.  Check with your lender to see the options that are available to you.