Waiting for lower rates before buying a home?

Minneapolis, MN:  We get it. Today's mortgage interest rates are bouncing around rates not seen for 20-years, causing many people to pause their home purchase plans.  Who can blame you.  But, is waiting costing you more money in the long run than buying today, then refinancing when mortgage rates drop?

First, understand home prices have continue to go up, bucking what many people thought, that  thought prices were going to crash.  Instead, just had another month with ‘exceptionally strong’ monthly home price gains. August marks fourth consecutive month with a new record average high home price.

Let us assume a home that was priced at $400,000 just two years ago. Figure 20% down, and your loan amount would be $320,000.  The loan only payment at 7.50% on a standard 30-yr fixed would be $2,237.

Now assume you wait two years. That $400,000 home is now $450,000. With 20% down, your loan amount is $360,000, but rates have dropped realistically to 5.75%. On a 30-yr fixed, the loan only payment is $2,100.

We all see the 'cheaper' payment... But...

YOU lost the $50k in equity, you made the landlord rich, you didn't have that new home today, and you can always refinance.

Now, factor in that 5.75% sample rate, but on your $320,000 loan when you refinance in two years, and the new 30-yr fixed loan only payment is $1867.  A nice drop of $367.

The Bottom Line:

It probably DOES MAKE SENSE to buy today if you can. Do we know home prices will continue to rise, and can we guarantee rates will drop in the future?  Of course not. But both of those items are extremely realistic as we continue to have a huge shortage in home inventory, and as inflation get's under control, mortgage interest rates WILL drop.

Finally, remember: The best time to buy was always 5-years ago!