Don’t Focus on Interest Rates, Focus on the Overall Payment
As the new year unfolds, it’s a season of resolutions and fresh starts. If homeownership is on your list of aspirations, why wait when you can kick start that journey now? Don’t fall into the waiting game for interest rates to fluctuate—instead, shift your focus to the bigger picture: your overall payment. Take the proactive step of determining what you can afford and pave the way for achieving your homeownership goals in 2024.
New Mantra: How Much Is the Payment?
You may have heard the age-old mantra that lenders and real estate agents alike peddle on their social media and to clients, “Date the Rate, Marry the House!”
While the reason behind this phrase is true and meant to encourage potential buyers not to miss out on their dream homes by waiting for interest rates to go down, it also does imply that a refinance opportunity is going to always be possible.
While, more often than not, refinancing is not a problem, it’s not something we ever want to guarantee or lead people to assume they’ll be able to refinance into a rate that is much lower than their closing interest rate. We don’t love to promote this phrase because we don’t want to imply any promises that we may not be able to keep later on. Especially because no one can ever accurately predict what is going to happen with interest rates, and trying to time the market will leave you frustrated and disappointed, especially if you are counting on a refinance sooner rather than later.
We’ve seen that this can get buyers into somewhat sticky situations sometimes, where they buy and close on a house at the top of their budget and are stressed about making payments each month, assuming they can refinance later for a much better interest rate and overall payment. Don’t do this to yourself! You want to make sure you’re comfortable paying the overall payment, regardless of interest rate, when you purchase a home. No one knows what the future holds.
That’s why, instead of promoting, “Date the Rate, Marry the House,” we want to give you a new mantra to hold onto while you go into this journey of house-hunting, “How Much is the Payment?”
What Does It Mean?
Instead of focusing on interest rates, focus on the overall payment and what you can afford. Don’t stretch your budget too thin—be realistic and see what you can make work. If you can comfortably make your overall mortgage payment with current interest rates, there is no reason to wait on your home-buying dreams.
When you start looking at homes, look at what your overall payment would be for each house you like so you can make an informed and confident offer when the time is right. Use that number to help you make your decision on waiting to buy or jumping right in, not the interest rate.
Don’t know your budget? Talk to us! We can take a look at your income and circumstances and give you an idea of what you could get pre-approved for.
Why Buy Now?
The best time to buy a house is when you need to buy a house. If you are in need of a new home, whether it be jumping into the world of home ownership for the first time, or if you need to move locations or downsize or get a little more room, then there is no reason to wait on interest rates to drop. You never know how long you could be waiting.
If you don’t own yet, it’s a longer amount of time that you are paying someone else’s mortgage, rather than paying toward your own mortgage and ownership. If you are comfortable with the price now and decide to get into a house sooner than later, you are building equity right away! This is the number one way American’s build wealth – through homeownership.
If and when rates do drop, more buyers are going to come out and join the market. If you’re waiting . . . everyone else is waiting, too. Prices will go up, people will become more aggressive in terms of their offers, inspections could be waived (which we NEVER recommend doing, by the way!), and everything will become much more competitive overall.
Do you want to potentially risk losing the home of your dreams for a more reasonable purchase price than what it could become if the market is flooded with buyers? There’s no guarantee the inventory will go up, so you could potentially be competing over the same amount of homes on the market with more buyers in the future than now. This could cause your journey to buying a new home to become even lengthier, especially considering the time that you waited for rates to drop!
If you can afford the overall payment now—you’re better off starting the process so that you are able to buy the home you like without having to compete for it. And who knows, chances are high that if you are making your payment and everything else with income and credit is going well, you’ll be able to refinance in the future if rates do drop, and then it becomes a win-win for you! Building equity while you wait for rates to drop instead of building equity for your landlord!
Bottom Line
Remember that waiting for the perfect interest rate might delay your dream of homeownership. By focusing on what you can afford in terms of your overall house payment, you’re taking control of your financial journey. If you can comfortably manage it now, why wait? Seize the opportunity and hop on the path to homeownership. Your dream home awaits, and the time to make it a reality is now.
As always, we’re here to assist in your home-buying needs in any way possible. Don’t know your budget? Talk to us! Want to get pre-approved? Come on in and see us! Want to go over loan programs? We’d be happy to!
And above all, happy house hunting in 2024!