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The spring homebuying season is almost here. Winter’s gloom giving way to sunny spring days means better weather for open houses and exploring the neighborhood where you want to buy. Blooming flowers boost curb appeal and families looking to move after the school year ends are ready to buy a home and relocate. All these factors lead to a bustling homebuying season.
Yet homebuyers who’d normally be prepping for their home purchase may be hesitating, as mortgage rates are still relatively high. However, rates have eased over the last few weeks, and that may be enough incentive to push buyers to start their search. But is now the right time to buy, or should you wait for rates to go lower?
Find out how low your mortgage rate could be here.
Should you buy a home now with mortgage rates under 7%?
If interest rates are the main factor in your homebuying decision, the temptation may be to wait for rates to go lower. After all, the average 30-year mortgage rate has been dropping over the last several weeks and has stayed below 7% since mid-January. So, you may be thinking about waiting until those rates drop below 6% to buy a home.
That approach might work if today’s mortgage rate trends continue. However, there’s no guarantee of success when rate optimism drives the decision to buy or wait, says Adam Neft, sales manager at GO Mortgage.
“I genuinely believe with any financial decision ‘hope’ is not a great strategy,” Neft says. “Some buyers have been waiting for one to two years for rates to go down. [Rates have] stayed steady, gone up, [and] shown slight decline. But waiting and hoping isn’t panning out.”
Locking in a rate today will help you avoid future rate increases that could materialize if inflation continues to rise and the Fed continues to delay interest rate cuts. While the Federal Reserve doesn’t directly set mortgage rates, the decisions it makes tend to impact where mortgage rates head. So, if inflation continues on its upward trajectory and the Fed decides to wait on cuts to its benchmark rate, we could see mortgage rates tick up.
Buying now also means that you may be able to avoid other potential drawbacks, too. For example, those who’ve waited for lower rates over the past two years have faced higher home prices, inventory issues and fierce competition from other buyers, Neft notes. While today’s homebuyers can’t avoid those issues, buying now instead of waiting for lower rates shields them from new challenges that could arise in the future.
“While the market may seem daunting right now, it may still be the right time for buyers who are well-prepared financially to take on homeownership,” says Max Koziol, national purchase director for Chase Home Lending. “We always advise customers to not … try to time the market in terms of rates, as it’s nearly impossible to accurately predict how they will move.”
Find the best mortgage rates available to you now.
How to find the best mortgage rates
Here are a few ways that you can get the best mortgage rate:
- Improve your credit score: Mortgage lenders typically provide lower rates for borrowers with higher credit scores. Paying down your credit card balances below 30% of your credit limit is one of the simplest ways to improve your credit score, as the ratio of your balance to credit limit plays an important role in your score.
- Compare rates from multiple lenders: Mortgage rates vary from lender to lender, so getting multiple rate quotes can help you find lower rates.
- Make a bigger down payment: The more you pay for a home upfront, the less risk your lender takes on, and that can translate to lower mortgage rates.
- Consider a 15-year mortgage: Mortgages with shorter repayment periods tend to have lower interest rates. However, your monthly payments will be considerably higher than they would with a 30-year mortgage.
- Do a rate lock: Rate locks allow you to “lock” a mortgage rate for a certain number of days. They’re a valuable tool right now, as there’s a chance inflation could rise in February and bump up mortgage rates.
The bottom line
Mortgage rates have stayed under 7% for the last several weeks, signaling that now may be a good time to buy a home. While waiting for rates to drop further can be tempting, the past two years have shown that rates and home prices can rise quickly. Additionally, another inflation report is set to be released next month — and if it shows that inflation has continued to rise, mortgage rates could go with it.
