interest rates Maggie Hatfield November 4, 2024
Since September, mortgage rates have been on a rollercoaster. They first dipped into the low 6% range only to climb past 7% by the end of October.
Yikes.
If you’re feeling overwhelmed, you’re not alone. These rate fluctuations can make home buying feel like a guessing game. Fortunately, you don’t have to wait for the “perfect” rate to make your homeownership goals happen.
The truth is, buyers can find opportunities no matter where rates land. By understanding what drives mortgage rate fluctuations, you’ll not only feel more in control but also be better prepared to lock in the best possible rate for you. Let’s dive into what’s behind these ups and downs—and how you can move forward confidently, no matter what.
Although it may seem completely random, mortgage rates don’t change on a whim—they’re influenced by a mix of economic factors, including inflation, Federal Reserve policies, and the general state of the economy.
Here’s a quick rundown of some of the main drivers:
Planning monthly costs can feel daunting when rates are unpredictable. However, there are ways to budget effectively, even in a high-rate environment:
By planning carefully, you can feel confident in your budget and be prepared for any fluctuations.
Buyers today are getting creative to score better deals. According to Zillow, 45% of people who bought a home over the past year managed to secure rates below 5%.
So, how are buyers securing rates below the market standard? It’s often with the help of builder incentives (35%), seller financing (26%), refinancing (25%), or even assistance from friends and family (23%). Here are some ways to help you lock in a lower rate:
You’ve likely heard this before—higher credit scores can lead to lower interest rates. Here’s how to keep your credit healthy:
Lenders see a high credit score as a sign of reliability, and a little effort here can save you thousands over the life of your loan.
Mortgage points and rate buydowns are upfront payments to reduce your interest rate. Nearly one-quarter (23%) of buyers who secured a rate under 5% over the past year bought points to do so. When buying a newly built home, builders sometimes cover these costs to attract buyers, but these strategies can work with resale homes, too. Just remember to:
Most buyers opt for a 30-year fixed-rate mortgage, but adjustable-rate mortgages (ARMs) and shorter-term loans can sometimes yield lower rates. With an ARM, for example, you’ll start with a lower rate that may adjust later, which can be a smart choice if you don’t plan to stay in the home for decades. But be cautious—your payment could rise after the initial fixed period.
Putting more money down can lower your rate, but if saving for a hefty down payment feels impossible, down payment assistance programs can help. In fact, Zillow data shows that 60% of first-time buyers used assistance.
As more inventory comes to the market, sellers and builders may offer special financing deals to close a sale. Recent data shows that 35% of buyers in 2024 got lower rates through incentives from sellers. Don’t hesitate to ask if closing cost contributions are on the table—they could reduce your monthly costs significantly.
Mortgage rates may ebb and flow, but your path to homeownership doesn’t have to. So, start exploring your options, and be sure to consult with your mortgage lender. Remember, it’s not about waiting for the “right” rate—it’s about making the best decisions for your unique situation.
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