Essential Mortgage Rate Guidance for Prospective Home Buyers, based on the insights from industry professionals
High mortgage rates have got many potential homebuyers and homeowners alike feeling the squeeze. Chucking their cash into the property market seems like a far-off dream for some folks, with high rates making houses seem out of reach. But, it ain't all doom and gloom. Here's what you need to know, straight from the experts themselves.
Are you thinking about buying a dwelling or refinancing your mortgage soon? Get ready to put on your strategic thinking cap. Here's what the wise heads have to say.
Keep your eyes peeled on the Fed and tariffs
If you're keeping your fingers crossed for a rate drop, the best thing you can do is keep your eyes peeled on the Fed's Federal Open Market Committee. This vital bunch will have a significant impact on interest rates for mortgages, along with other consumer borrowing and interest-bearing products.
"Mortgage rates might stick around their current 7% ranges leading up to the next FOMC announcement due to the Fed's likely hesitance to jump in with both feet till they see more data," says Jeff Taylor, a Mortgage Bankers Association board member and founder of Mphasis Digital Risk. "If core PCE inflation rises when it's released at the end of June, it could suck rates upward."
Lower inflation? Well, that could mean the opposite, with sweet relief for loans and mortgages. Keep your eyes on the horizon for economic shifts, and you just might spot an opportunity.
You should also keep your ears perked for changes around the new administration's proposed tariffs, which, after a brief pause, have recently been reinstated by a federal appeals court.
"Mortgage rates have been heavily influenced by both the short-term and long-term uncertainty of the impact of tariffs on the economy," says Darren Tooley, team sales manager at Union Home Mortgage.
Get smart with buydowns
Most experts reckon that, while mortgage rates will eventually drop, it won't be anything earth-shattering. So, should you hold your breath for lower rates? That depends on your situation.
If you want these slightly lower rates, you've got two options: wait it out or embrace the temporary rate buydown. These clever tricks allow you to pay a fee for a lower interest rate for the first one, two, or three years of the loan.
"Strategically use temporary buydowns if you need something more affordable today," says Kevin Watson, senior home loan specialist at Churchill Mortgage. "Don't forget to negotiate a buydown for a couple of years as we work through this mess. Once rates drop, you can refinance."
Negotiate your heart out
With rates as they are, buyers aren't exactly jumping at the chance to snap up properties like they used to. That means that lenders and home sellers might be more open to negotiations.
"Buyers can negotiate closing cost credits from sellers, and those credits can be used to pay points to buy down a rate," says Jeff Taylor. "In general, it's better to ask for a rate buydown than a reduction in the selling price. Over a 30-year term, the rate buydown offers greater monthly savings compared to the price reduction."
Think twice (or thrice) before refinancing
Thinking about refinancing? Do your calculations and know your reasons. With the vast majority of homeowners already sporting rates below 6%, refinancing at today's rates most likely won't help much in the cost department.
If you're considering refinancing to take cash out, improve your home, or pay off higher-interest debts, keep in mind that "It's not a bad idea, as long as you don't max out those cards again," says Watson.
In short, today's mortgage landscape requires a more thoughtful, strategic approach than ever. High rates might feel like an insurmountable roadblock, but tools like rate buydowns, smart refinancing, and negotiation strategies can help pave your way to success. Stay tuned to inflation data, Fed meetings, and economic policy changes, and exercise caution when navigating the cash-clogged property market. And, if you find a place that fits your needs and budget, jumping on it might be the wisest financial decision you ever make.
Aly J. Yale, Contributing Writer
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- To mitigate the impact of high mortgage rates on potential homebuyers and homeowners, it's essential to monitor the Federal Reserve's Federal Open Market Committee for signs of interest rate adjustments.
- Buyers and homeowners should consider temporary rate buydowns as a strategic method to secure lower interest rates for the initial years of a loan, especially in a market where significant rate drops may not be imminent.
- In the current real estate market, buyers may find more amenable negotiators among sellers and lenders due to the reduced demand, potentially allowing for closing cost credits or rate buydown negotiations.
