Interest rates just went up, and the Federal Reserve is predicted to raise them two more times in 2018. For consumers who make purchases via loans, that means it will cost more to buy that home or other big-ticket item.

Given this rise in rates, you may be thinking of pushing yourself financially to get into a loan before interest rates go up again. Before you do, consider the following:

• Do you have an accurate picture of your household income? If you work in a job where your income is dependent on a strong economy – for instance, the hospitality or entertainment industries – it may be that the last few years have been fairly stable and lucrative for you. Even a slight market correction could have an impact on your income; make sure you review your compensation structure and know how any variable income like bonuses or incentives are calculated.
• Do you have ample savings for a rainy day? You should have an emergency fund, in cash, in case of an unfortunate occurrence like loss of employment or serious illness. Most personal finance experts recommend having at least three months’ worth of expenses saved. Although no one likes to think about the worst case scenario, these types of life events do happen. You’ll breathe a little easier knowing that you have a cash reserve to cover your necessities while you recover from one of life’s storms.
• Will the purchase jeopardize other worthy ventures, like retirement? Do you have enough discretionary income to afford that beautiful new home and still fund long-term goals like retirement? If not, it’s probably smart to put off that large purchase for now.
• Can you work on your credit score to offset a slight rise in interest rates? If your credit profile has a few bumps and bruises on it, you likely won’t qualify for the best interest rates currently available. Talk with an experienced loan officer who can advise you on improving your score – whether by paying down debt, simply giving your existing loans some time to demonstrate good repayment behavior, or other tactics. This will ultimately lead to the best interest rates available for your situation.

We know it can be easy to hear the news of rising interest rates and want to run to the nearest bank to lock in a loan with today’s rates. However, it will pay off in the long run to be smart about your borrowing.

If you believe you are in a position to borrow for a new home, contact us and we’ll connect you with one of our trusted mortgage partners. We love helping people make smart use of their money, and are ready to help you when the time is right to make the leap into homeownership.