With home prices increasing and mortgage rates reaching new highs, many potential buyers are wondering whether now is an optimal time to purchase. After all, mortgage rates could fall significantly within several years and make buying even more appealing than before.
Answering that question depends on a range of personal and market considerations.
1. You Can Refinance
Mortgage rates remain at historic lows, giving you the chance to save by refinancing at a more advantageous rate. Refinancing can reduce monthly payments and interest over the life of the loan as your credit has improved since taking out your original loan or switching from an adjustable-rate mortgage (ARM) into a fixed-rate loan, thus decreasing monthly costs as well as the total cost.
Refinancing can also help consolidate debt with one mortgage payment and pay off home equity lines of credit (HELOCs). Refinancing may offer the potential to lower cash-out interest rates – which may make sense if you plan to be living in your new home for an extended period or have built significant equity.
Not everyone, however, finds waiting until a better market justification enough. Instead, these buyers should focus on increasing their income so as to afford a larger monthly mortgage payment.
2. You Can Wait
Mortgage rates have skyrocketed since their 2020 lows, creating hesitation among potential home buyers to enter the market. Many are waiting for rates to decrease by one or two percentage points so that they can save at least $100 a month on mortgage payments. There may be good reasons for you to wait – such as waiting for commission checks, inheritances or bonuses to come through or improving personal finances such as paying down debt or improving credit score – however these shouldn’t be used as excuses to postpone purchasing real estate.
3. You Can Buy Now
As a prospective homebuyer, you may be waiting for mortgage rates to fall before investing in real estate. But basing your decisions entirely on mortgage rates shouldn’t be your sole criteria when selecting your new residence.
The Federal Reserve’s efforts to combat inflation have caused mortgage rates to skyrocket and led many prospective buyers to put off purchasing decisions for now.
Simental recommends that buyers should assess their finances and financial goals carefully in order to decide if now is an opportune time for them to purchase a house. He notes that, if buying right now is beyond your budget, you could try negotiating with sellers, asking for concessions, or increasing your credit score as ways to bring down costs of your future residence.
An important thing to keep in mind about mortgage rates is that they only affect how much interest will accrue over the life of your loan, not necessarily its overall costs. You may still refinance should mortgage rates decrease in the future.
4. You Can’t Go Back
Homeownership can be achieved more quickly when you buy now, giving you the opportunity to refinance later should mortgage rates drop. Waiting for lower mortgage rates might seem like the ideal scenario; however, waiting may only lead to disappointment as rates continue to rise due to Federal Reserve actions combatting inflation and slow economic growth – perhaps never giving another opportunity at such low interest rates!