How To Buy a Home Without Waiting for Lower Rates

Many homebuyers are waiting for mortgage rates to drop before making a move, but will that actually happen? According to the latest projections, rates are expected to decline, but not as much as many people had hoped. If you’re holding off on buying a home in hopes of significantly lower rates, you could be waiting longer than expected.

The good news? Even if rates don’t drop substantially, there are still ways to make home ownership more affordable today. Let’s explore strategies to help you buy now instead of waiting for uncertain rate changes.

How Much Will Rates Drop?

A few months ago, experts predicted mortgage rates could fall below 6% by the end of the year. However, new projections from Fannie Mae, the Mortgage Bankers Association (MBA), and Wells Fargo suggest rates will stabilize closer to 6.5% by the end of 2025.

This means waiting for a significant drop could leave you on the sidelines longer than expected. And if you need to move due to life changes, like a new job, growing family, or downsizing, waiting simply may not be an option.

So, instead of postponing your homeownership goals, consider creative financing strategies to help you afford a home today.

Creative Financing Options in Today’s Market

Since mortgage rates are expected to remain in the mid-6% range, it’s worth exploring alternative financing solutions to make buying a home more affordable. Here are three strategies to discuss with your lender:

1. Mortgage Buydowns

A mortgage buydown allows you to pay an upfront fee to lower your mortgage rate for a set period. This helps reduce monthly payments early on, which can be especially useful if you anticipate refinancing later when rates drop.

Why consider it? Twenty-seven percent of real estate agents say first-time homebuyers are requesting seller-paid buydowns to make homes more affordable. If sellers are motivated, they may cover the cost of the buydown as part of the deal.

2. Adjustable-Rate Mortgages (ARMs)

Adjustable-rate mortgages (ARMs) start with a lower interest rate than a traditional 30-year fixed loan. This makes them a good option if you expect rates to drop in the coming years and plan to refinance.

Concerned about the risks of ARMs? The mortgage industry has changed significantly since the 2008 housing crisis. Today’s ARMs are much safer, as lenders now require borrowers to qualify for the highest potential payment, not just the introductory rate.

Bottom line: If you don’t plan on staying in your home long-term or are confident you’ll refinance before the rate adjusts, an ARM could save you money upfront.

3. Assumable Mortgages

With an assumable mortgage, a buyer takes over the seller’s existing loan—including their lower interest rate. Given that over 11 million U.S. homes qualify for this option, it’s worth exploring.

Why consider it? If a seller locked in a 3% interest rate a few years ago, assuming their mortgage could save you thousands in interest over time compared to today’s 6.5% rates.

Not all loans are assumable, but many FHA, VA, and USDA loans qualify. Ask sellers or your real estate agent if this is an option when house hunting.

The Risk of Waiting for Lower Rates

Even if rates drop slightly over time, home prices are expected to keep rising. That means waiting could mean paying more for the same home down the road.

For example:

• A $400,000 home today at a 6.5% mortgage rate could cost more next year, even if rates drop slightly.
• If home prices increase by just 5%, that same house could cost $420,000 or more in a year—negating any savings from a small rate drop.

Instead of waiting, consider financing strategies like buydowns, ARMs, or assumable mortgages to make homeownership affordable now.

Conclusion

Waiting for a significant drop in mortgage rates may not be the best strategy. Instead, explore creative financing solutions that can make homeownership affordable today. Connect with a local lender to see which options work best for you and start your home search with confidence.

Thinking about buying a home in St. Augustine? Let’s discuss your options and find the right strategy to make homeownership happen for you.