18 - What is Marry the House, Date the Rate?

One popular piece of advice given to first time home buyers is to “marry the house and date the rate.” This phrase refers to the idea of putting more emphasis on finding a house that meets your needs for the long term, and thinking of the interest rate in shorter or temporary term. We'll be taking a closer look at this concept and see what it means for you, the first time home buyer.

Transcript

Phil: 0:00

Welcome to the First Time Home Buyers Podcast. One popular piece of advice given to first time home buyers is to marry the house and date the rate. This phrase refers to the idea of putting more emphasis on finding a house that meets your needs for the long term, and thinking of the interest rate in shorter or temporary terms. Let's take a closer look at this concept and see what it means for you. The first time home buyer. When you're looking for a home, you should focus on finding one that suits your lifestyle and your needs, rather than focusing solely on getting a great price. After all, if you find yourself meet your needs, chances are you won't be happy no matter how great of a deal you got. It's important to pick out features like bedrooms, bathrooms, locations, things like that that really fits your family size and the amenities. Things like your pool or the outdoor space. It's really gonna maximize your enjoyment of the property if you're purchasing a starter home. Ensure that it meets your needs now and has the right features to make it attractive to future buyers. The idea of marrying the house is to consider it a long-term commitment. The idea of dating the rate is that it's a short-term temporary commitment. So let's talk about the benefits of dating the rate before even shopping for a., you should have spoken with your lender and discussed your budget. Part of this discussion will be around the interest rate that you qualify for. Interest rates change daily, so keep that in mind. In a higher interest rate market like today, you have a few options. To get better rates, you could increase your credit score. You can increase your down payment. You can buy down the rate, which essentially is money you pay in cash that lowers your interest rate. In each case, it's dependent on your circumstances, how much this will actually affect your rate. But the idea of dating the rate is simply that you're betting on rates going lower in the future, or your credit increasing enough that you can refinance into a better interest rate loan. nobody knows exactly what interest rates will do, so you're simply betting on them going down or your credit score going up enough that it's gonna give you options in the future if rates never go down. You're still married to the house at whatever rate you originally got when you purchased it. I don't particularly care for this saying, but the idea is solid behind it. You should buy a home for the long term, and the interest rate is something you can change months or maybe even years later. Let's do a quick history lesson on mortgage interest rates for a 30 year fixed loan. In the seventies, rates were in the mid 7% range. They started to increase around 1974 through the end of that decade where it reached an average of 10.11% by the end of 1978 in 1981. Mortgage rates topped out at 18.45% and remained in the double digits for almost the entire decade By the late nineties. Mortgage interest rates dropped below 10% and they've hovered around six to 7% for nearly the last 20 years. We of course, saw huge drop in rates in 2020 with December rates at a record low of 2.68% and most of 2021 with rates in the high twos and low 3%. In March of 2022, rates began to see rising numbers into the six to 7% range during each high and low. People still bought homes during the low rates. People refinanced out of high interest rate loans like those that bought in the eighties at the peak. Interest rates when they refinanced in the nineties, some of them cut their payments nearly in half, That's the idea of dating the rate. The important factor is to ensure that you can afford the payment that you're making. If interest rates never drop, then you're fine. If they do drop, then you're gonna be able to save money. At the end of the day, deciding to buy a home. Is a big decision, one that you should make very carefully. Make sure you're doing your research, choosing a house that's right for you. And when it comes to deciding on an interest rate, don't panic. If rates are high, remember that they can change at any point. You can always take advantage of those rate changes to save money in the future, but, It may be years out. So when it comes to dating the rate, just consider that an added bonus to your home purchase. Some loan programs even have streamlined refinance options. Many lenders have options to refinance it, low or very low cost to you to help you get into a more affordable loan. So if you'd like to know more, feel free to reach out. But head on over to fthbpros.com. Where we have all of our podcast episodes available, articles and newsletter resources, along with our Facebook group where lenders and agents can help answer your questions. Thank you for your support and happy home buying.