Inflation devalues the purchasing power of money and the interest earned on savings is almost always less than inflation. Tangible assets like your home consistently become more valuable over time. In inflationary periods, a home is a good investment and a hedge against inflation.

Borrowing money at fixed rates during times of inflation can be very advantageous…like buying a home. The rate stays the same over the term of the mortgage and so does the payment instead of going up at the rate of inflation.

In September 2022, rents rose by 7.2% according to NAR Chief Economist, Lawrence Yun and "rents are accelerating to higher figures with each passing month." The annualized rate for this year is 10.6%. Buying a home allows you to avoid rent increases while enjoying property appreciation.

The housing shortage that is fueling the price appreciation, as well as increases in rent, is something that has existed for over ten years, yet American home building has not kept pace with population growth.

When you are repaying the mortgage, you are using dollars that are worth less and less due to inflation. Home Price Appreciation has been close or beaten inflation in each of the past five decades.

*Revised predictions for 2022 home price appreciation are: Fannie Mae estimating 16%; Freddie Mac 12.8%; NAR 11.5%. Average of three projections is 13.4%

The funds for the down payment and closing costs that are sitting idle in a bank, while an otherwise qualified buyer waits to see what happens in the market, are having their value eroded by inflation. At the current rate of inflation, $48,000 would be worth $39,073 in three years. In seven years, it would be worth $29,697.

A 90% mortgage at 6.3% for 30-years on a $400,000 home that appreciates at 4% a year will have an estimated equity of $202,000 in seven years due to appreciation and amortization. That is a 22.8% annual rate of return on the down payment plus $8,000 closing costs. That is a significant hedge against a current inflation of 7.1%.

The borrowed funds in the mortgage produce leverage for the homeowner to enjoy the benefits as the value of the home goes up while the unpaid balance goes down with each payment made due to amortization.

Every day, a renter, who is otherwise qualified to purchase a home, is faced with a decision to continue renting or buy a home. Renters will ultimately be facing an increase in their rent, feeling an erosion of the purchasing power of their funds, and experiencing an opportunity cost by not benefitting from the appreciation and amortization benefits of buying a home.

Let’s connect and talk about what opportunities are available now and options that could benefit you, even considering the volatile economic atmosphere we’re all facing.

Credit scores are used to assess risk and determine whether a borrower is approved or declined for a mortgage, credit card or some other type of credit. The score is a numerical value ranging from a low of zero to a high of 850 or 900 depending on the credit bureau.

The higher the score, the more likely the lender will be repaid in a timely manner.

1. A higher credit score could help you get a lower interest rate
2. You can get a free credit report from all three major bureaus at www.AnnualCreditReport.com.
3. Your credit score doesn’t have to be perfect to get a loan … most lenders want buyers to have a minimum of 620 but FHA will consider as low as 500
4. Credit utilization, the percentage of credit used compared to what is available, should be kept below 30%; amounts higher could negatively affect your credit score.
5. There is a difference between a soft and a hard credit pull. The former doesn’t hurt your score, but the latter can lower it a few points. Try to avoid multiple hard inquiries.
6. Credit cards, bank loans, car loans and home loans are considered "good credit" and a mixture of different types is helpful compared to only a car loan.
7. Opening new credit accounts after you apply for a mortgage can hurt or even prevent you from being approved on the mortgage.

There are five components to making up a credit score. 35% of the weighted average is determined by payment history like paying on time. The next highest item is the amount owed and counts for 30% of your score. This component deals with credit utilization which is expressed as a percentage of what you owe divided by what is available.

The length of time you have had credit established accounts for 15% of the score. New credit and the types of credit accounts are weighted at 10% each. Opening several accounts in a relatively close period will negatively affect your score. While it isn’t necessary to have all types of credit like credit cards, installment loans, finance company accounts and mortgage loans, the types of credit in the mix are evaluated.

If you need help increasing your score, a trusted lender that provides your pre-approval can also make suggestions that would improve your credit. Contact your real estate professional to get a personal recommendation of a trusted mortgage lender.