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Advice for Homebuyers Concerned About High Mortgage Rates

April 24, 2024 | 3 minute read

The current U.S. weekly average for mortgage rates on a 30-year loan as of 4/26/2024 is 7.17%. Like most homebuyers, you probably find these high mortgage rates discouraging. 

That’s understandable, as high mortgage rates negatively impact your purchasing power and may make it harder to afford your dream home. The good news is that there are things you can do to offset the impact of these rates. Take a closer look at your options to decide whether now is a good time to become a homeowner for you.

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Are High Mortgage Rates Going Down in 2024?

In Q4 of 2023, the national average for mortgage rates on a 30-year loan was 7.3%. Experts predict that rates are going to steadily decline throughout the year, dropping below 6% by Q4 2024. 

A 1% drop may not inspire confidence in homebuyers, but it is a great sign that rates are trending in the right direction. The rapid surge in rates that occurred a couple of years ago was unprecedented. Current developments are more on par with historical trends, which usually involve gradual rises and falls in rates based on economic conditions.

Keep in mind that homeownership is a long game, and you aren’t stuck with a high interest rate forever. If rates continue to drop, you could purchase now and refinance in a year or two, which could save you hundreds on your monthly payment.  

What Can Homebuyers Do About High Rates?

Homebuyers are at the mercy of mortgage rates — sort of. While you can’t control the current rates, there are a few ways you can reduce their impact on your monthly payment and your home-buying dreams. 

If you want to offset high mortgage rates, you should:

Make Sure Your Credit Is Excellent

The national average mortgage rate is high enough as-is. If your credit score isn’t great, your rate could be even higher. Optimizing your credit score can help you get the best deal possible. 

There are a few ways to give your credit a boost. Pay down on credit cards, eliminate any small recurring bills you can, and make sure you are caught up on all loans. Also, avoid applying for any new loans or financing any major purchases until you complete the home-buying process. 

Save More for a Down Payment

If you finance more than 80% of a home’s purchase price and are using a conventional or Federal Housing Administration (FHA) loan, you’ll have to carry private mortgage insurance (PMI). The PMI amount is usually between 0.5% and 2% of the loan amount and paid via monthly installments as part of your mortgage.

A PMI policy can add hundreds of dollars to your monthly payment. However, if you put at least 20% down, you won’t have to carry PMI, which could make your payment more manageable. 

Negotiate a Rate Buydown

A rate buydown is a form of prepaid interest. You purchase points from your lender to lower your interest rate. Typically, each point lowers your rate by 0.25%, and lenders will only let you purchase between 1 to 4 points. Still, this program can offset your monthly mortgage costs by a few hundred dollars.

The best part is that you may not have to pay for the buydown yourself. Your real estate agent can negotiate with the seller to use some of their funds to buy down your rate. 

Another option is exploring lender-sponsored buydown programs. In these scenarios, your lender will offer a temporary rate buydown that lasts anywhere from 1 to 3 years.

For instance, some lenders offer a 3-2-1 program. In these programs, your rate is 3% below the national average in year one, 2% lower in year two, and 1% lower in year three. The goal of these programs is to give you time to wait on lower market rates so that you can refinance when the time is right for you. 

Is Now a Good Time to Buy? 

Buying a home is a personal decision. There are no one-size-fits-all answers. However, if you dream of owning a home, the first step is to connect with experienced industry professionals, including a real estate agent and mortgage company. Together, they can help you navigate this exciting journey and make your dreams a reality. 

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