If you’ve been holding off on buying a home in hopes that mortgage rates will drop significantly, you may want to reconsider your strategy. While experts predict some decline in rates this year, they likely won’t fall as much as many prospective buyers hope.
What’s the Latest on Mortgage Rate Predictions?
A few months ago, forecasts suggested that mortgage rates could dip below 6% by the end of the year. However, more recent projections from sources like Fannie Mae, the Mortgage Bankers Association (MBA), and Wells Fargo indicate that rates may stabilize closer to 6.5% instead.
For those waiting for a significant rate drop before making a move, this means you could be waiting longer than expected. And if life circumstances—like a new job, expanding family, or other major change—require you to move, waiting may not be an option.
Ways to Make Homebuying More Affordable Now
If you’re eager to buy a home but concerned about mortgage rates, there are financing options that could make homeownership more accessible. Here are four strategies to discuss with your lender:
1. Negotiate a Mortgage Buydown
A mortgage buydown allows you to pay an upfront fee to temporarily lower your interest rate. This can help reduce your monthly payment for the first few years of your loan, giving you more financial flexibility. Some buyers negotiate with sellers to have them cover the cost of a buydown, making this an even more attractive option.
2. Buy Now, Refinance Later
One way to approach homebuying in the current market is to focus on finding a home that fits your budget now, with the understanding that your mortgage rate is not permanent. The phrase "Marry the House, Date the Rate" captures this idea—you can commit to a home you love while knowing that when interest rates drop, you can refinance for a better deal. Since home inventory is always changing, the home you want may not be available later if you wait too long.
3. Use an Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgages typically start with a lower interest rate than a 30-year fixed mortgage, making them appealing if you plan to refinance in the future or sell before the rate adjusts. While ARMs had a risky reputation during the housing crash of the mid-2000s, lending standards are much stricter today. Borrowers now must qualify based on their ability to cover future payments, reducing the risk of payment shock.
4. Look into Assumable Mortgages
An assumable mortgage allows a buyer to take over the seller’s existing loan—along with its lower interest rate. This option is especially appealing in today’s market, as some homeowners have mortgage rates well below current levels. If you’re interested, be sure to ask your real estate agent whether a home you’re considering has an assumable loan and how to qualify.
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