If you’re thinking about purchasing a home, waiting until mortgage rates decrease may tempt you. After all, lower mortgage payments could expand your purchasing power by decreasing expected loan repayment costs.
But is waiting the best idea? Here are a few reasons why it might not be.
Waiting for rates to go down could cause you to miss out on a great deal.
One of the worst mistakes homebuyers can make when looking to purchase is basing their purchase plans around hoping mortgage rates will go down – while this might happen, there’s no guarantee it will!
Rates fluctuate due to various economic and personal circumstances, including your credit score and down payment size.
Waiting until interest rates decrease to purchase your home can lead to costly regret in the form of higher mortgage payments than would otherwise be necessary.
To avoid this situation, contact your local lender and see how current interest rates impact your purchasing power. They can assist in helping you locate a home that fulfills all your needs while still permitting an affordable mortgage rate.
You’ll be stuck with a high rate.
Loan rates remain high, prompting prospective homeowners to be reluctant to jump into the housing market. They hope that with Federal Reserve’s efforts at curbing inflation, rates might decrease slightly by one or two percentage points. That would make a considerable impact in their monthly payments, which is one of the main motivations why people wait for lower interest rates to make decisions. Unfortunately, however, there’s no guarantee they’ll return to previous levels within one year’s time. And if you are locked into an exorbitant rate, it will have an impactful long-term effect on you – possibly lasting decades or even forever! That being said, perhaps an alternative strategy might be “dating the mortgage rate but marrying the house”. That way if rates drop later on you could refinance.
You’ll have to pay a higher down payment.
One factor preventing you from purchasing a home could be the amount you’ll need for down payment. Lenders use loan-to-value ratio to evaluate loans’ riskiness; your down payment has an impactful influence on this number – the more money you put down, the lower its loan-to-value ratio becomes and therefore its riskier appearance in their eyes.
Mortgage rates have reached their highest point ever this year and potential home buyers may be waiting to purchase until rates decline further. But prospective home buyers should remember that rates may still go down; don’t depend on this happening for your financial plan!
Work with a lender to discuss how current rates impact your goals, and let’s connect! Not a member yet? Sign up here and take advantage of personalized posts!