As a mortgage originator, I understand navigating interest rates when buying can be a major concern for prospective homebuyers. As of December 11, 2023, the average 30-year fixed mortgage rate is 7.56%. While this is higher than historical averages, it’s important to remember that rates are cyclical and can fluctuate over time. Also, it is important to understand that what you see online likely is outdated from what we as lenders see. One thing that has become wildly popular has become buying down rates, whether temporarily or permanently.
Buying Down the Rate: Is It Worth It?
In this environment, some buyers consider paying closing costs to buy down their interest rate. This can be a smart strategy for those who plan to stay in their home for a long time and want to save money on monthly payments.
Here are some factors to consider before deciding to buy down your rate:
- The size of the buy-down: A larger buy-down will result in lower monthly payments but will also require a higher upfront cost.
- The length of your loan term: The longer your loan term, the more you’ll benefit from a buy-down, as you’ll have more time to recoup your upfront costs.
- Your financial stability: Make sure you have the financial stability to afford the higher monthly payments before considering a buy-down.
Additional Strategies for Today’s Market
Here are some additional tips for navigating the current mortgage rate climate:
- Shop around for the best rates: Compare rates from multiple lenders to ensure you’re getting the best deal. Also, make sure to maximize your credit score.
- Consider a shorter loan term: A shorter loan term will typically have a lower interest rate, but the monthly payments will be higher.
- Make a larger down payment: A larger down payment will reduce your loan amount and result in lower monthly payments.
- Don’t take the lowest rate: I know this sounds counter intuitive, but partnering with the right lender will help you save money, which could be a higher rate.
As inflation continues to come down, take consideration that the mortgage you take out now, may not be the mortgage you have in 3, 5, or 7 years. So make sure you are asking questions and becoming educated. This can help you make an expensive mistake when you close on your home.
While navigating interest rates can present challenges, understanding the current market and exploring options like buying down the rate can help you make informed decisions and achieve your homeownership goals. Remember, consulting with a qualified mortgage professional can help you determine the best strategy for your individual financial situation. Schedule a complimentary consultation as you begin your journey, or call us directly 303-779-0591 to get honest answers.
