If the only way buying a house makes sense is if mortgage rates drop later, buying may not make sense yet.
That may sound blunt, but when mortgage rates are over 7%, asking whether to buy now or wait is completely reasonable.
There is not one answer that works for everyone. A better question is: What would have to be true for buying now to work for you?
Do mortgage rates automatically follow the Federal Reserve?
No. A Federal Reserve rate change does not automatically produce the same change in fixed mortgage rates.
Fixed mortgage rates are influenced more directly by longer-term bond markets, including Treasury yields and mortgage-backed securities. The Federal Reserve can influence the larger financial environment, but it does not simply set the rate a buyer receives on a 30-year mortgage.
That is why waiting for a particular Federal Reserve announcement does not guarantee a particular mortgage rate.
Does the complete monthly payment work today?
Start with the payment available now—not the payment you hope to refinance into later.
Mortgage principal and interest are only part of the cost. Your complete monthly housing payment may also include:
- Property taxes
- Homeowners insurance
- Mortgage insurance, when applicable
- Condominium or homeowners association fees
- A realistic amount for maintenance and repairs
A lender can explain the loan choices and show you the numbers. Your decision should also leave room for the rest of the life you want to afford.
How long does the house need to work for you?
Think about your likely ownership period.
If you may move again in two years, the costs of buying and later selling matter differently than they would if the property could work for seven or ten years.
No one can predict every life change. The point is to consider whether the home fits your reasonably expected plans—not only whether you can complete the purchase.
Will you still have financial breathing room?
Buying a house should not require using every available dollar just to reach the closing table.
Consider the money you will need for closing costs, moving, immediate purchases, maintenance, unexpected repairs and your general financial reserves.
Repairs do not check the interest rate before they happen.
Can you count on refinancing later?
Refinancing later may be possible. It is not guaranteed.
No one can promise when rates will fall, how far they will fall, what your property will be worth at that time, whether you will qualify, or whether the refinancing costs will make financial sense.
A future refinance can be a possibility. It should not be the plan holding the entire purchase together.
Could lower rates create more competition?
Possibly. If mortgage rates fall, additional buyers may enter the market because the monthly payment becomes more manageable for them.
That can create more competition for the same homes. But it is not a reason to rush into buying now. It is simply one factor to consider alongside price, payment, available inventory and your own readiness.
Should you buy now or wait?
Higher rates do not automatically mean you should not buy. They also do not mean you should force the numbers to work.
Buying now may make sense if the house, timing, complete payment and financial reserves work for your life today without depending on a future refinance.
Waiting may make sense if the payment is uncomfortable, the purchase would leave too little in reserve, or your plans are still uncertain.
Both choices are legitimate. Make the decision from your actual numbers rather than a prediction about where rates will go next.
The Buying a Home page explains the buying process in plain language. If you are considering a purchase in Philadelphia, Montgomery County or Bucks County, you can also ask Jess a question or start a Clarity Conversation.
Jess Carpenter is a Realtor®, not a mortgage lender or financial adviser. Ask a qualified lender to explain loan options, qualification requirements, rates and costs for your circumstances.