August 8, 2022 by Leave a comment

Because of the volatility in the housing market and economy, you may be thinking if now is the best time to buy a house or whether it’s better to wait until 2023. However, if you’ve been waiting for your ducks to line up, it may be a tough choice.

How Rising Mortgage Rates Are Affecting Home Buyers

Mortgage rates are the highest they’ve been in over a decade and affordability remains the biggest obstacle to homeownership. Interest rates have been on a steady climb upward over the last several months from 3.22% for a 30-year fixed rate mortgage the first week of January to 5.51% by mid-July.

At the beginning of the year, a buyer’s monthly mortgage payment was around $1,300 (excluding taxes and fees) for a 30-year fixed rate mortgage on a $300,000 house. Today, a buyer’s monthly mortgage payment would increase to about $1,700 per month.

As mortgage rates go up, it raises the overall cost of buying a house with a mortgage. This leaves many home buyers asking “Should I buy a house now or wait until 2023?” 

While market fluctuations are outside of a buyer’s control, it doesn’t mean home buyers are now priced out of the market because of rising interest rates.

Should I Buy a House Now or Wait Until 2023?

There’s no guarantee that interest rates will go down next year and buyers shouldn’t wait if they’re in a position to buy right now. 

Rent prices have also been increasing, but when you own a home, you’re also building equity. Every mortgage payment you make reduces what you owe on your loan but increases the amount of your home that you actually own. 

Home equity gives homeowners a resource that they can tap into to pay off debt, pay for large expenses, or use in retirement.

However, you shouldn’t feel pressured to buy if your financial situation is not ideal. By putting yourself in the best position to buy, you can potentially reduce what you pay on your mortgage.

Total Mortgage has mortgage experts standing by who work with lenders across the nation. Find a banker in your neighborhood today.

6 Tips for Buying a Home Despite Mortgage Rates

If you’re asking yourself “Should I buy a house now or wait until 2023?” and you have everything else in order financially, there are certain steps you can take to make homeownership more affordable. 

With these six tips, you can be one step closer to owning a house despite fluctuating mortgage rates.

1. Use Mortgage Points to Lower Your Interest Rate

To help you understand what mortgage points are and how to utilize them to decrease your interest rate, here are a few things to keep in mind while purchasing a home with them: 

Mortgage points are a form of fee one can pay to lower the interest rate. Each point you wish to buy would cost you 1% of the total mortgage loan amount, thus one point on a $500,000 loan would cost you $5000. 

Each point reduces your interest by around 0.25 percent, however how much a point is worth in terms of loan interest and whether it’s worth it depends on the lender and loan type. 

2. Get a Mortgage With a Shorter Term

The standard 30-year loan duration isn’t the only way to define purchasing a home, many home buyers may opt for a shorter loan term ranging anywhere from 10 to 30 years. Both the conventional and short-term approaches have their merits and downsides that depend on the individual borrower’s needs.

Choosing a shorter loan duration has two major advantages that make a short-term mortgage worth it for some home buyers:

For one, choosing a shorter loan term has the advantage of a lower interest rate, but it also raises your monthly payments even if they are spread out over a longer period of time. 

Another significant advantage of a shorter loan period is the potential to quickly create equity and achieve ownership of the property, which may be more advantageous depending on circumstances.

3. Consider an Adjustable Rate Mortgage (ARM)

Increasing numbers of home buyers, both first-time and repeat, are embracing adjustable-rate mortgages or ARMs in an effort to save money. This is specifically a valuable option for buyers who don’t intend to hold on to their house for the conventional 30 years. 

An ARM is a great option as the rate tends to be lower within the first 5 to 10 years of the loan. This makes ARMs a good option if you only plan to live in a house for 5 to 10 years and want to save money on your monthly payments while still reaping the advantages of homeownership, especially for first-time buyers.

4. Make a Bigger Down Payment

Even though many individuals are unable to, making a larger down payment can significantly reduce your monthly mortgage payment and interest rates. You’ll also be able to avoid paying private mortgage insurance (PMI) if you make a down payment of at least 20% of the home’s value. PMI is insurance that protects lenders if you default on the mortgage and the home goes into foreclosure

In addition, if you put down more than 20%, you may be eligible for better loan terms and even higher quality properties, depending on your needs and preferences. 

5. Improve Your Credit

Having a credit score between 740 and 800 could help you get the best interest rate on a mortgage, but you may need to alter your spending habits and improve your financial situation to get there.

Here are a few suggestions:

  • Always pay your bills on time
  • Decrease debt-to-income (DTI) ratio
  • Decrease your credit utilization 
  • Become an authorized user on someone else’s credit card
  • Consider a credit builder loan 

6. You Can Always Refinance When Rates Go Back Down

Even though it’s referred to as a “fixed rate,” there is nothing stopping you from refinancing at any point in the future. Therefore, if you want to become a homeowner despite less-than-ideal circumstances, you can always refinance when interest rates drop.

However, it’s important to make sure refinancing makes the best financial sense. While even a 1% drop in your interest rate makes a big difference, you’ll also need to factor in closing costs. Refinancing closing costs can add up to 2.5% to 5% of the loan’s principal amount. 

Apply for a Home Loan With Total Mortgage

For those wondering “Should I buy a house now or wait until 2023?” there’s no guarantee that rates will go down and there are steps you can take to potentially qualify for a better interest rate on your mortgage.

Whether you’re in less-than-ideal circumstances and looking to buy a property, or you’re in the best financial time of your life, consider applying with Total Mortgage to get a free rate quote and apply online. Our mortgage experts are standing by to help you.'

Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.

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