If you’ve been holding off on buying a home because you’re hoping mortgage rates will drop, you’re not alone. But is that the best strategy? According to the latest expert forecasts, while rates are expected to decline slightly, they may not drop as much—or as quickly—as many buyers want.
The good news? You don’t have to put your dreams of homeownership on hold. Even with today’s rates, there are creative financing options that can make buying a home more affordable right now. Let’s explore three strategies that could help you get into a home sooner rather than later.
How Much Will Mortgage Rates Drop?
A few months ago, many experts predicted that mortgage rates could fall below 6% by the end of the year. However, recent updates from industry leaders such as Fannie Mae, the Mortgage Bankers Association (MBA), and Wells Fargo suggest that rates may stabilize around 6.5% instead.
If you’ve been waiting for a significant drop before purchasing, you may be waiting a while. And if life changes—like a new job, a growing family, or a relocation—mean you need to move sooner, postponing your purchase may not be a practical option.
3 Creative Ways to Afford a Home Right Now
Since mortgage rates may not decline as much as expected, here are three alternative financing strategies to discuss with your lender:
1. Mortgage Buydowns: Lower Your Rate Now
A mortgage buydown allows you to pay an upfront fee to temporarily lower your mortgage rate. This can reduce your monthly payments early in your loan term, making homeownership more affordable in the short term.
- Why it works: A lower initial payment gives you financial flexibility.
- Market trend: 27% of real estate agents report that first-time buyers are increasingly requesting buydowns from sellers to help with affordability.
2. Adjustable-Rate Mortgages (ARMs): A Flexible Approach
Adjustable-rate mortgages typically start with a lower interest rate than a traditional 30-year fixed mortgage. This can make them an attractive option, especially if you plan to refinance in the future when rates drop.
- What’s changed? Unlike the risky ARMs of the early 2000s, today’s ARMs require borrowers to qualify at a higher payment, ensuring they can afford their loan even if rates adjust upward.
- Industry insight: Lance Lambert, Co-Founder of ResiClub, explains:”. . . ARM products today are different from many of the products issued in the mid-2000s. Before 2008, lenders often approved ARMs based on borrowers’ ability to pay the initial lower interest rates. Today, lenders verify income, assets, and jobs, reducing risks.”
3. Assumable Mortgages: Take Over a Lower Rate
An assumable mortgage allows you to take over the seller’s existing home loan—including their lower interest rate. With over 11 million homes qualifying for this option, according to U.S. News, it’s a strategy worth considering.
- How it works: Instead of applying for a new loan at today’s rates, you assume the seller’s loan terms, potentially saving thousands over the life of your mortgage.
- Who qualifies? This option is typically available for FHA, VA, and USDA loans, making it a great choice if you meet the lender’s eligibility requirements.
Bottom Line: Don’t Let Rates Hold You Back
Waiting for mortgage rates to drop significantly may not be the best plan. Instead, options like buydowns, ARMs, or assumable mortgages could help you secure a home at a price that works for your budget right now.
If you’re serious about buying, connect with a local lender to explore these options and find the best path forward. How do today’s rates impact your homebuying plans? Let’s talk!