5 helpful tips for buying a home while mortgage rates are high
If you're in the market for a new home, you've probably faced some challenges — most of which are caused by high interest rates. After all, high mortgage rates can make it difficult to find affordable options since they have a significant impact on monthly payments.
Then again, there are benefits to shopping for a home while interest rates are high. With fewer buyers to contend with, there's a higher likelihood you'll be able to land the home of your dreams at a reasonable price.
Considering this, it may still be worth shopping for a home in today's market. But is there anything you can do to make your mortgage more affordable?
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5 helpful tips for buying a home while mortgage rates are high
"There are multiple options to consider when looking to purchase a home in any market, even in a higher rate environment," explains Bill Banfield, executive vice president of capital markets and chief risk officer at Rocket Mortgage. Here are some tips to help you find the most affordable options in today's market:
Consider buying mortgage discount points
"One question the buyer should ask themselves is if they will be staying in the home long-term, which is where a rate buydown, or discount points, could be helpful," says Banfield. Mortgage discount points are paid to the mortgage company in exchange for a lower interest rate.
It may be wise to buy these discount points if you plan on staying in the home for the long run. However, if you're planning on selling your home in a few years, discount points may not be worth the upfront expense.
Learn more about your mortgage options today.
Look for low-down-payment options
"Another key that could save some money is finding a loan option with a lower required down payment," says Banfield. "Rocket Mortgage offers its ONE+ program, a conventional mortgage option where the qualified buyer can put 1% down and receive a 2% grant toward their down payment."
Saving money on your down payment won't do much to lower your monthly mortgage payment. However, savings equal to 2% of the cost of your home could help you pad your savings account to prepare for emergency expenses that arise as you pay off your home.
Take advantage of lower competition
"Lastly, home shopping in a non-peak time, like before the spring real estate frenzy begins, could save the buyer some money since they may be less likely to face competition for the home they have their eye on," says Banfield.
There are typically more buyers in the market when interest rates are low. So, buying now while interest rates are high means you'll have less of a chance of getting into a bidding war.
You may even have more ability to negotiate with the seller, which could result in a lower price on your home. Sure, you'll still have to lock in a loan at today's interest rates, but you can always refinance when interest rates fall — maintaining the low principal balance of your mortgage in the process.
Look for a home you want to live in
"Instead of trying to time the housing market, rate fluctuations or worrying about factors outside of their control, I advise buyers to find a home they want to live in, not a house they can afford," explains Bob Driscoll, SVP and director of residential lending at Rockland Trust Bank. "The features that make a house a home vary from person to person. Potential buyers should invest in a house that aligns with their values and priorities so they can feel at home when they move in."
This won't directly save you money, but it's still an important consideration. Would you pay an extra $100 a month for a home that fits all of your needs, or would you rather save $100 a month and have to live in a home that doesn't? Some homebuyers ignore the practicalities in place of finding a home they can afford. So, make sure your priorities are met when you shop.
Consult a professional
"Consulting a professional, like a mortgage lending officer, can help you make home-buying decisions that will help ensure your financial success in the future," says Driscoll.
At the end of the day, a professional may be able to show you options and savings opportunities that you wouldn't have considered on your own.
Get in touch with a mortgage pro now.
The bottom line
High mortgage rates can make buying a home more stressful, but they don't have to. Follow the tips above as you shop for a home in today's high interest rate environment to make sure you get the most value for your money.
