Mortgage rates have recently seen significant increases from their recent lows, making home purchases more challenging for some prospective homebuyers. Is it worth waiting until interest rates decrease again before making your purchase decision?
According to experts, experts state no. Here’s why:
1. Interest Rates Could Stay High for a Long Time
Interest rates remain relatively high, leading some potential home buyers to wait until mortgage rates decline before making their decision. Lower mortgage rates often translate to reduced monthly payments which could save thousands in total over time.
Mortgage rates appear likely to remain elevated. They have already exceeded the record lows seen during the Covid pandemic and experts estimate they may remain above 3% for most of 2023 and into 2024.
But that doesn’t mean avoiding homebuying entirely; rather, take the time to compare lenders and find the lowest mortgage rate possible. While shopping around may be time consuming, it could save tens of thousands over time.
2. You May Lose Out on the Home of Your Dreams
Waiting for mortgage rates to decline could cost you the home of your dreams. When interest rates are high, fewer people can afford homes which reduces demand causing prices in certain markets to skyrocket.
An even small change in mortgage rates can drastically limit your purchasing power and extend the length of time needed to repay your loan, so it’s wise to get preapproved and understand exactly how much home you can afford regardless of what mortgage rate is in effect.
Along with determining your affordable home purchase amount, it is also important to work on improving your credit score and increasing your down payment amount. Doing this will increase your chance of qualifying for lower mortgage rates in the future and position you for success when they finally decline.
3. You’ll Have to Refinance Later
Mortgage rates have skyrocketed, putting many home buyers out of reach of homeownership altogether. Many home buyers therefore decide to buy now and refinance later, enjoying lower monthly payments while having the option of refinancing should rates dip back down again later on.
Refinancing can carry its own set of risks. To obtain a competitive mortgage loan rate, for instance, a good credit score will usually be necessary to qualify. If this requirement cannot be met then serious repercussions such as issues making monthly payments or an IRS lien could ensue that lead to serious financial issues including damage to credit rating or even foreclosure may ensue.