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The Price of Waiting for Mortgage Rates to Drop

Thursday, October 6, 2022   /   by Laura Larson

The Price of Waiting for Mortgage Rates to Drop

Recently, there has been a considerable rise in mortgage rates. And if you're thinking about purchasing a home, you might be wondering what this means to you. When making your home-buying plans, the following can help you decide with factual information.

Effects of Increasing Mortgage Rates
Mortgage rate increases have an effect on your ability to buy things by increasing the price of buying a property and lowering the amount you can comfortably pay. This is how it goes.

Let's say you want to purchase a property for $400,000; the median price of a home in the United States is $389,500. Here is how your purchasing power may alter if mortgage rates rise if you're trying to shop at that price range while keeping your monthly payment at $2,500 to $2,600 or less.

You might need to look at homes at a different price range as your borrowing capacity falls as rates rise.

Will mortgage rates decrease?
You could be considering delaying your purchase because of the increase in mortgage rates and an associated decline in purchasing power. According to Realtor.com, these are the possible future rates: "Numerous homebuyers probably winced...upon learning that the Federal Reserve had raised short-term interest rates by further three-quarters of a percentage point, driving up mortgage rates to unprecedented levels. And the already high rates will only rise further."

Therefore, if you're expecting mortgage rates to decrease, you might have to wait for a while as the Federal Reserve attempts to contain inflation. Additionally, keep in mind that renting will become more expensive over time if you decide to do so as a temporary solution. According to the National Association of Realtors (NAR) Senior Economist and Director of Forecasting Nadia Evangelou: "There is no question that these higher rates reduce the availability of houses. However, in addition to rising borrowing costs, rents also grew at their fastest rate in almost 40 years."

In essence, it is accurate to say that the cost of purchasing a property has increased since last year, but renting has also increased. This implies that you will pay more in either case. The distinction is that homeownership also involves building equity over time, which will increase your net worth. Which makes more sense to you?

Bottom Line
Every person is in a different scenario. Working with Laura Larson will help you better understand how changing mortgage rates may affect your monthly mortgage payment at different loan amounts.