## What Happens When Mortgage Rates Go Up?
Mortgage rates are one of the most important factors to consider when buying a home. They affect the monthly payment you’ll make, the total amount of interest you’ll pay over the life of the loan, and how much you can afford to borrow.
When mortgage rates go up, it can have a significant impact on your home buying plans. Here’s what you need to know:
### How Mortgage Rates Are Set
Mortgage rates are set by a number of factors, including:
* **The Federal Reserve’s interest rate:** The Fed sets the target interest rate for short-term loans, which affects the interest rates on all types of loans, including mortgages.
* **Economic conditions:** The health of the economy can also affect mortgage rates. When the economy is strong, demand for loans increases, which can push rates up.
* **Inflation:** Inflation is the rate at which prices increase over time. When inflation is high, lenders may charge higher interest rates to protect themselves from losing money on their loans.
### What Happens When Mortgage Rates Go Up?
When mortgage rates go up, it means that it will cost more to borrow money to buy a home. This can have a number of consequences, including:
* **Monthly payments will be higher:** The higher the interest rate, the higher your monthly mortgage payment will be.
* **You may be able to afford to borrow less:** If your monthly payment is higher, you may not be able to afford to borrow as much money to buy a home.
* **It may take longer to pay off your loan:** If you have a higher interest rate, it will take you longer to pay off your mortgage.
### How to Prepare for Rising Mortgage Rates
If you’re planning to buy a home, it’s important to be prepared for the possibility that mortgage rates may go up. Here are a few things you can do:
* **Get pre-approved for a mortgage:** This will give you a good idea of how much you can afford to borrow and what your monthly payment will be.
* **Shop around for the best mortgage rate:** Compare rates from multiple lenders before you commit to a loan.
* **Make sure you have a good credit score:** A good credit score will help you qualify for the best interest rates.
* **Save for a down payment:** A larger down payment will reduce the amount of money you need to borrow and can help you qualify for a lower interest rate.
* **Consider an adjustable-rate mortgage (ARM):** ARMs have interest rates that can fluctuate over time. This can be risky, but it can also help you save money if rates go down.
### When to Buy a Home
The best time to buy a home is when you can afford it and when you’re prepared for the possibility that mortgage rates may go up. If you’re not sure if you’re ready to buy a home, talk to a financial advisor to get help making a decision.
## Additional Resources
* [Mortgage Calculator](https://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx)
* [How to Get Pre-Approved for a Mortgage](https://www.rocketmortgage.com/learn/get-pre-approved)
* [Shopping for a Mortgage](https://www.consumerfinance.gov/ask-cfpb/how-can-i-prepare-to-apply-for-a-mortgage-en-1855/)
* [Adjustable-Rate Mortgages (ARMs)](https://www.fanniemae.com/borrow/loan-types/adjustable-rate-mortgage)