Average US 30-year fixed mortgage interest rates hit a 20-year high of 7.08% in the last week of October, more than double what they were a year ago, according to Freddie Mac (FMCC).
Homebuyers are not happy.
With a $350,000 mortgage, mortgage payment An additional $927 per month compared to late 2021.
Ironically, home shoppers are more likely to buy the home they want now. The widespread bidding war that pushed home prices to record highs last year is over.
Nationwide housing inventory is still low, but places like Phoenix are currently number of active listings Not seen since April 2019, four times higher than March 2022 levels.When Boise Active ListingsIdaho, a pandemic hotspot, hit a six-year high.
Sure, homebuyers can afford a home, but with today’s stratospheric rates, should they?
” Expert Tips:Want to buy now?Be prepared to have your offer accepted at home Get pre-approved for a mortgage before looking for a home.
What does “married home and dating rates” mean?
“Marry the house, date the rate” suggests that you should plan to refinance later to buy a home at the available mortgage rate.
After all, the mantra says that a home and how it is financed are two different things. Loans are replaceable – the house is what counts.
Besides, there is a theory that people are refinancing all the time.
According to a report from the National Association of Realtors, time at home 13.2 years. But people aren’t married to mortgages like homes. A mortgage is as interchangeable as a blind date you went on just to be nice.
42% during the Covid-19 pandemic Homeowners aged 25-40 refinancingsaid the LendingTree study.
But that was when interest rates were at or near historic lows. Will favorable terms for refinancing ever return?
Why “Dating Your Rate” Works
Should I expect to be able to refinance later? Here’s why this strategy makes sense:
Low interest rates are likely to return
Mortgage rates have generally declined since the early 1980s, but not in a smooth way. Like clockwork, the rate spikes and then drops.
In May 2000, the 30-year fixed rate rose to 8.64%, but fell to 6.89% in less than a year, according to the . Freddie Mac’s Weekly Survey. By July 2008 the interest rate was around 6.5%, but by July 2009 it had fallen again to 4.80%.
This pattern has been repeated over and over again for over 40 years. Can interest rates sustain their current high levels? It is entirely possible, but unlikely when history is our guide.
We also know that mortgage rates tend to fall during recessions. Many experts Federal Reserve will not stop rate hikes until it caused a recession in the United States. A recession is his one of the Fed’s weapons for controlling inflation.
Some question the wisdom of buy a house before the recessionhistory shows that pre-recession homebuyers are in prime position to refinance later.
Higher prices mean less competition
A surge in mortgage payments has sidelined many home buyers.
To qualify for a mortgage, a homebuyer must put approximately 43% or more of their income toward future mortgage payments, plus all other debt payments such as student loans, auto loans, and credit cards. You can not.
A person making $100,000 a year while paying $1,000 in debt each month could easily get a $350,000 mortgage at 3%. You will exceed your income limit.
Simply put, high interest rates are pushing aside countless homebuyers.
If you still qualify, it will be much easier for you to find the home you want to “marry”. You can get an edge over sellers and get homes for less than the asking price in many areas. This is him in 2020 and 2021 a mostly unheard of situation.
But when interest rates fall, buyers frozen in the thaw all flock like bees in spring to available homes again.
No downsides if you can afford to pay
Yes, mortgage interest rates are high. But if you can afford to pay, there’s no downside to buying now.
If interest rates go down, monthly savings will be a bonus.
Rents are rising and landlords are fed up with the rate of inflation. Fix housing costs and let landlords raise rents for different tenants.
The Case Against Trying to ‘Marry House and Date Rate’
Some refinances come with serious risks, including losing your home.
rate may not drop
A bad idea is to overextend your budget in hopes of a quick refinancing, say within six months.
There is no guarantee that interest rates will fall and may even continue to rise beyond 2023.
Sure, a fixed 7% interest rate won’t change, but it’s useless if you can’t afford it.
Ann variable rate mortgage won’t help you After 3, 5 or 7 years, the lower interest rate alternative may no longer be available and interest rates may rise.
You may not be eligible for refinancing
Even if interest rates go down, you may not be able to refinance in an emergency.
Below are some examples of unfortunate events that can occur between the time you purchase and the time your low interest rate applies.
Lost my job and can’t qualify for a new loan
Medical malpractice delays car payments and lowers credit score
Homes are declining in value and you don’t have enough equity capital to refinance
In the aftermath of 2008, the government announced a refinancing program available to people with disabilities. No or even negative equity in their homeEven today there are programs that you can Refinancing without proof of income.
But expecting such a program now or in the future is a risky bet.
Should You Marry Home and Dating Rates?
Every homebuyer in history has taken some pretty big risks. Most likely, they promised to pay him for 30 years.
So, assuming you can afford to make today’s payments long term, buying a home now isn’t as risky as it’s ever been.
If you can afford it, now is a great time to buy. Fewer bidding wars means lower home prices, which in turn means less lending.
If cheaper mortgages reappear, you’ll be in a great place to keep your home, but away from that blinding mortgage rate.
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