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Inflation: What Approach to Take When Buying a Home

Orwell Kitchen

June 13, 2022

Buying a home can be one of the most rewarding and stressful experiences a person can have. Especially during these times, inflation is currently affecting both current and new homeowners. If you are interested in buying a new home, though, then it's best not to wait, especially if you are currently renting. 

Inflation is the highest it has been in four decades which has both its positive and negative effects. The good news is that there are ways to hedge against inflation by making smart financial decisions.

Johnnell Jones, VP of Operations for Citywide Mortgage says that because of current inflation and the impact it has on the housing market, it is important not to wait to decide to buy a home even when inflation is high. If you know you can afford a house payment, then it is still a good time to buy. 

“Borrowers should do a budget with the basic needs (gas and groceries and other payments like cars, utilities, and insurance) at the current prices and using their take home pay as income, then plug in the house payment (include property tax and insurance) and make sure they can afford it. Many times, house payments are as low as or the same as rent payments, so it makes sense to buy a home which builds equity instead of renting,” says Jones.

First off, buying a house does not just happen overnight. It takes time to figure out which mortgage is best for you and your current circumstances. So, in viewing your financial situation, one of the first decisions you need to make is whether a fixed or adjustable-rate mortgage will be used to finance your home. A fixed rate will keep home payments consistent over the period that you will be in the house. This means that the interest rate will not change based on outside factors (inflation). This is the most preferred option among long-term homeowners because they avoid the risk of increases in interest rates over the time of the mortgage. Sounds like a pretty good deal, right? It can be, but there are some cons to weigh before going all in on this option. 

Fixed rates are the plausible option for long-term homebuyers and are not recommended to people who are looking to stay in a home for a short period. This loan option is also more difficult to qualify for and starts out with a higher rate. 

Jones says that even with concerns about rising interest rates we are still currently in a historically low-interest rate environment. Fixed interest rates may be the most viable option unless one plans on selling and refinancing the home before the first adjustable interest rate increase.

What would be the best kind of fixed-rate loan to consider when purchasing your new home? Two of the main loan types of loans are conforming and non-conforming loans. Conforming loans are also known as conventional loans, which is regulated to meet government standards. In other words, the amount a buyer can borrow is regulated. 

Non-conforming loans obtain different requirements, mostly based on credit scores and debt-to-income ratios. There are two options when it comes to non-conforming loans: Federal Housing Authority (FHA) and Jumbo loans. A higher down payment may be required from a buyer pursuing the jumbo loan option and will need to have a higher credit score to qualify for this loan. 

Federal Housing Authority (FHA) loans are used by buyers that may not have a high credit score and down payments required for jumbo or conventional loans. 

Lastly, do not go through this process on your own. Seek help from an expert to find the best financial options for you. Not only will a professional use your current situation to your advantage, but they may also advise you against options that you would have considered on your own. Especially during rising inflation, it is important to be informed on how you make your financial decisions. 

Citywide Mortgage is a preferred lender of Ideal Homes & Neighborhoods and close more home loans on time than any other lender with Ideal. Get prequalified for a home today at