Homebuyers who were hoping for mortgage rates to go down might feel disappointed because recent reports show that inflation is higher than expected, reaching 3.1%. This means the Federal Reserve, which aims for a 2% inflation rate, still needs to work on controlling inflation.
With inflation staying high, the benchmark interest rates will likely remain at their current 23-year high. As a result, mortgage rates are also expected to stay high. While some had hoped for rate cuts as early as March, it seems they may be delayed until May or June.
What should we do in this scenario?
In this scenario, homebuyers who are eager to start the process of owning a home at this time face limited options. However, there are still some steps they can take to navigate the situation effectively. Here are three things homebuyers should consider, if mortgage rates don't fall soon:
1. Boost Your Credit Score: Keep in mind that the lowest advertised mortgage rates are typically reserved for borrowers with excellent credit scores and clean credit histories. If your credit score isn't top-notch, you may have a higher interest rate than the current average of 7.29%. Take steps to improve your credit score by paying off debts, making timely payments, and avoiding new credit applications.
2. Consider Buying Anyway: Although today's rates may not be as low as in the past, they still fall within a reasonable historical range. Waiting indefinitely for the perfect rate might mean missing out on your dream home, especially if it becomes available now. Buying a home now means you can transition from renting to owning, putting your money towards an investment rather than rent payments. Additionally, if rates drop before you close the deal, you may have the option to adjust to the new rate or refinance in the future.
3. Take Action: Don't delay your homebuying plans indefinitely. Start the process now to avoid further uncertainty. Explore all available options to secure the best possible rate and improve your chances of qualifying for a favorable mortgage.
Explore Alternative Loan Options:
When traditional fixed-rate mortgages might not seem like the best option in a high-interest setting, looking into alternative loans could offer some help. For instance, adjustable-rate mortgages (ARMs) often start with lower interest rates compared to fixed-rate ones. While they do come with the risk of rates going up later on, they might be a good choice if you plan to sell or refinance the home before the adjustable period kicks in. Also, government-backed loans like FHA or VA loans might have easier credit score requirements and lower down payment options, making it easier to buy a home despite the current rate situation. Checking out these alternative loan options could give you more flexibility and potentially lower upfront costs as a homebuyer.
In summary, while the current mortgage rate environment remains uncertain, there are proactive steps homebuyers can take. Focus on improving your credit score, consider purchasing a home despite the current rates, and take action to move forward with your plans. Ultimately, the goal is to stop paying rent and start building equity for the future.
Ready to explore your options? Contact Loan Factory today for expert guidance on finding the right mortgage despite the current rate environment.
