Reach Your Goals

Whether you’re a first-time or move-up home buyer, you may be considering postponing a purchase if your area’s affected by climbing home prices. Or you may be balking at today’s mortgage interest rates.

However, no matter where prices and rates may be, you have some different strategies to consider.

Buy now, refinance later. While it’s impossible to predict when interest rates will change, almost all lenders expect rates to eventually go down. If you’re buying in an area where home prices are still rising, this approach could be worth considering, especially if you’re renting and not building equity.

Make a larger down payment. If you have the funds to do this, it could help you in several ways. In addition to a possibly lower interest rate on a mortgage, it will provide lower monthly payments. Also, you may be able to forgo mortgage insurance or cancel it sooner than later.

Consider a shorter loan term. While this translates into higher monthly payments, it also earns you a lower rate. For example, while the current average rate for 30-year loans was 6.71% earlier this week (according to Freddie Mac), 15-year loans came in at an average rate of 6.06%. You’ll also save quite a bit in long-term interest.

MORTGAGE IQ

Will The 3% Loan Rate Ever Return?

If you’ve decided to postpone buying a home because of the current interest rates, it’s possible that you could wait longer than you’d planned.

If you’re waiting for the rates we saw in 2021 (which sank to under 3%, according to Freddie Mac), you may never buy. Here’s why.

Almost every economist has predicted that the 3% mortgage rate will probably never return. This is because the mega-low rates were triggered by a unique, unforeseen set of circumstances that began with a global pandemic in 2020. Thankfully, pandemics are rare.

While some forecasters predict that rates will decline over the next 12 months, they don’t see rates dropping below 5% any time soon. One MLS chief economist described the feelings of many would-be home buyers:

“People are still working through their five stages of grief on this mortgage rate stuff. And I think you have to reach the stage of acceptance … rates aren’t going to come down to where we were back during 2020 and 2021.”

One takeaway from these forecasts: Sure, mortgage rates might drop a little, but this may only end in frustration — especially if you’re stuck in a property that isn’t right for you. Perhaps it’s time to accept the current rate atmosphere, buy that next home, and enjoy the truly unique rewards of home ownership.