Mortgage interest rates can significantly impact your budget, especially when market rates are high. Rising interest rates could make it challenging to get into the home you want or even price you out of the housing market altogether. However, there are steps you can take to minimize the impact of high interest rates on your decision to buy a home. Here are nine tips to consider.

1. Save for a Larger Down Payment

Depending on the loan program, minimum down payment requirements can be as low as 3% or even 0%. However, the less money you put down, the riskier the loan is for the lender, which typically results in higher interest rates. A 20% down payment on a conventional loan can help you secure a lower interest rate and eliminate the need for private mortgage insurance (PMI). If you can’t meet that threshold, consult with a mortgage professional at O1ne Mortgage to come up with a down payment goal for your situation.

2. Consider Government-Backed Loans

Government-backed loans, such as Federal Housing Administration (FHA) loans, U.S. Department of Veterans Affairs (VA) loans, and U.S. Department of Agriculture (USDA) loans, often offer lower interest rates and less stringent credit approval requirements. However, these loans come with unique costs, so it’s essential to compare all your options with the help of a professional from O1ne Mortgage.

3. Buy Down the Rate

Mortgage discount points are a form of prepaid interest that can reduce your loan’s interest rate. Each discount point typically costs 1% of the loan amount and reduces your interest rate by 0.25% for the life of your loan. If you plan to live in the home for a long time, buying down the rate could make sense. Consult with O1ne Mortgage to determine if this strategy is right for you.

4. Opt for an Adjustable-Rate Mortgage

Adjustable-rate mortgages (ARMs) offer a fixed rate for an initial period, then a variable rate thereafter. These loans often provide lower interest rates for the initial fixed period. If you believe interest rates will drop before the fixed period expires, you can refinance the loan at a lower rate later on. Contact O1ne Mortgage to explore if an ARM is suitable for your needs.

5. Buy a Cheaper Home

High interest rates may have already impacted your housing budget, but it may be wise to limit that budget further to avoid being house poor. Finding a cheaper home can be challenging, but reducing your monthly payment can give you more time to save up for the home of your dreams. O1ne Mortgage can help you find a home that fits your budget.

6. Look Into an Assumable Mortgage

With an assumable mortgage, you’ll take over the seller’s mortgage loan instead of getting a new one. If the seller has a low-interest loan, assuming it could save you money. You can assume government-backed loans like VA, FHA, and USDA loans, but you’ll need to meet certain requirements. O1ne Mortgage can guide you through this process.

7. Improve Your Credit

Improving your credit score can help you qualify for a lower interest rate. While you can get approved for a conventional loan with a credit score of 620 or above, a score in the mid- to upper-700s is ideal. Building your credit score takes time, but even moderate changes can positively impact your interest rate. O1ne Mortgage can provide tips on improving your credit score.

8. Be Patient

Mortgage interest rates are constantly fluctuating. While it’s impossible to predict when rates will drop, it can be wise to wait until they’ve reached a level that allows you to buy the home you want without breaking the bank. In the meantime, work on building your down payment or improving your credit. O1ne Mortgage can help you monitor the latest interest rates.

9. Rent Part of Your House

Depending on the size of your home and your comfort level, you may be able to rent out a portion of your home. While this won’t change your interest rate or monthly payment, it can offer some relief to your budget. Before becoming a landlord, consider potential expenses and the extra time and effort it takes to manage a rental space. O1ne Mortgage can provide guidance on this option.

Monitor Your Credit Throughout the Mortgage Process

Whether you’re preparing to buy a home or are in the homebuying process, it’s important to monitor your credit regularly. Avoid applying for other forms of credit, which can affect your credit score and debt-to-income ratio. If you have questions about handling your credit during the mortgage process, consult with a mortgage professional at O1ne Mortgage.