Mortgage Rates Have Climbed to 7% — Should You Buy a Home or Keep Waiting?

With mortgage rates climbing back toward 7% faster than Spider-Man movie ticket sales, many prospective buyers are wondering whether it’s smarter to wait for the borrowing rate to fall. But real estate experts say focusing on interest rates alone can lead buyers to miss important considerations.

Here are housing market experts’ five best suggestions for whether now is the time to wait or buy.

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A 7% Mortgage Rate Isn’t Automatically a Reason To Wait

Mortgage rates may feel high compared to the pandemic era, but that alone shouldn’t drive a decision to buy or not.

Ken Sisson, associate broker with Christie’s International Real Estate SoCal, said it’s more important to determine what works for a buyer.

The main criterion buyers should look at, said Alexei Morgado, a Florida real estate agent and founder of Lexawise, “is if the total monthly payment fits the budget currently, without taking into account refinancing in the future.”

He broke down key costs such as account principal and interest payments plus real estate taxes, homeowners insurance, HOA fees and maintenance costs.

Your Financial Readiness Matters More

The health of your personal finances should be the deciding factor over rates. If buyers can comfortably afford the home and expect to stay for several years, buying may make sense even with today’s rates.

“Individuals that have analyzed their local market and done the full exploration, but need to save more for a down payment or pay off some debt, should wait,” Sisson said. But they should also have a back-up plan that is not simply “waiting for 3%.”

Don’t Buy a Home Assuming You’ll Refinance Later

Refinancing could eventually lower your payment, but Sisson said it would be “a mistake to rely on that and over-extend yourself today.” While buying a home is a hedge against housing inflation, he said, “Don’t ever count on it being in six months.”

Refinancing should not be a plan B if you’re stretched too thin at the time of buying, according to Morgado.

“While refinancing does make sense,” he said, “there is never a guarantee because income, equity and interest rates may change.”

Today’s Market May Offer Buyers More Leverage

One benefit of higher rates is that they have reduced buyer competition in many markets, creating opportunities to negotiate that weren’t available before.

Sisson finds that buyers are better able to negotiate “seller paid rate buy-downs these days.” While not all home sellers are willing to negotiate, he said buyers should keep their eyes on the price. They may even be able to negotiate closing costs and avoid bidding wars.

Stop Trying To Time the Housing Market

Perhaps the strongest consensus among experts is that waiting for the perfect combination of lower rates and lower prices rarely works.

“You can’t time the market. You navigate it,” Sisson said.

One frustrating feature of homebuying, he said, is that the best time to buy a home “is almost always about five years ago.” The positive spin is that buying a home is positioning yourself for the future.

Probably the best way to get a great deal is comparing multiple lenders offers. A nearly 7% mortgage rate isn’t automatically a reason to buy or wait. The deciding factors are whether the home fits your budget today, aligns with your long-term plans and supports your overall financial goals.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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