Why You Should Buy a Home Before Rates Fall

In the ever-evolving landscape of real estate, timing can be everything. If you’ve been contemplating the idea of buying a home, now might be the opportune moment to make that leap before mortgage rates take a dip. Yes- you read that correctly. It actually might make more financial sense to purchase a home *now*, rather than waiting for rates to fall into the sixes or even the fives.

According to Realtor.com, “If rates fell from 7% to 6%, buyers would save just over $221 a month on the mortgage payment of a median-priced home. (This assumes a 20% down payment on a $420,000 home and financing through a 30-year fixed-rate mortgage.) If rates dropped to 5%, they would save more than $430 a month.”

Now, monthly savings of over $400 really does hit the pocketbook in a way that you would feel. However, other people feel the exact same way. When mortgage rates dip significantly, buyers come out in droves. So if you’re waiting for rates to drop so that you can save a few hundred dollars a month, just know you’re not alone. Every time mortgage rates drop basis points, more and more people qualify for mortgages.

If there’s one thing we learned by looking at the state of the housing market during the height of the Covid-19 pandemic it’s that when supply is low, buyers will stop at nothing to secure a home: Bidding wars erupt, prices spike, and first-time buyers competing against investors and older buyers often lose out. Higher prices have the potential to wipe out any potential savings provided by lower mortgage rates.

Lower rates encourage homeowners to list their homes but all that means is that they’ll be swarmed by would-be buyers.

Of course, this advice isn’t meant to be taken by someone who genuinely cannot afford a higher monthly mortgage payment. Even the experts at Realtor.com are no proponents of “stretching financially to purchase a home you can barely afford. Homeownership is so much more expensive than most first-time buyers imagine. Expensive emergencies can strike at any moment—and will—and when they do, you’ll want to make sure you have enough in the bank to cover whatever might arise.”

All this advice is meant to do is provide a thought experiment for you. If you’re waiting for mortgage rates to go down to buy a home because you think you’ll be saving buckets of cash, we urge you to do a deep dive on the actual numbers. After all, you always have the option to refinance later on as the out of pocket expense of refinancing is almost always recouped over the life of the loan. As it turns out, the best time to buy a home may be right now.