Are You Thinking About Purchasing Real Estate Soon? | HomeBuyer Resources When considering home ownership, one of the primary concerns should be whether mortgage interest rates will drop or increase. Unfortunately, overemphasizing interest rate fluctuations could detract from focusing on more important considerations: yourself and your own financial status.
Here are a few reasons why waiting for lower mortgage rates may not be in your best interests.
1. You Can Refinance
As a borrower, you don’t need to feel constrained by your mortgage lender just because you used them for home purchase. Instead, shop around for refinancing lenders and compare mortgage rate quotes in order to see if there are more attractive offerings than the original ones you received.
If you don’t plan on staying in your home for too long, refinancing to a shorter term could help alleviate some of the budgetary strain associated with homeownership. Refinancing can also enable you to switch from an adjustable-rate mortgage to a fixed rate one; remove or reduce mortgage insurance premiums; or alter the length of your loan term.
Refinancing may also make financial sense if your credit has improved since getting the original mortgage loan. A better score may enable you to qualify for lower mortgage rates that could save money over the life of the loan.
3. You Can Wait for Rates to Drop
Federal interest rates, and therefore mortgage rates, move in cycles. Many homebuyers find waiting until mortgage rates decrease before making their purchase a smart move.
But that isn’t always the case: running the numbers shows how even small fluctuations in interest rates can have a dramatic impact on your homebuying power. For instance, if you were approved for a $400,000 loan with 20% down and an interest rate of 6.79% at closing costs would result in monthly mortgage payments of $2,439. Should it drop to 6% interest, monthly payments would increase by an extra $184 a month – giving lenders no choice but to offer lower loan amounts for homeowners looking for financing solutions.
At our firm, we often hear from prospective homebuyers who desire homeownership but are waiting to make their dream of homeownership come true due to rising mortgage rates or home price anxieties. But the truth is that you shouldn’t wait either: otherwise you risk competing against those who made the leap when rates were more attractive and home prices less soar.
4. You Can Wait for Rates to Rise
If you aren’t ready to buy, it may make more sense for you to stay out of the market and focus on saving more for a down payment or improving your credit score before mortgage rates soar and purchasing no longer makes economic sense.
Keep in mind that the higher rates have caused many homeowners to put their mortgage refinancing plans on hold, meaning once rates decline they could try reentering the market with more equity in their homes and may even gain the upper hand in bidding wars.
While inflation and policy changes have driven rates up, they’re unlikely to revert back down below 3% anytime soon. So if you’re ready to buy, don’t wait too long — or else risk missing out on one of the greatest opportunities of owning your own home!