Buyer Risks When Waiting for Mortgage Rates to Drop
April 29, 2024
U.S. News and World Report published an article in April 2024 that included data from a U.S. News survey of American mortgage trends this year.
In that survey, nearly 70% of house hunters who responded say they are waiting for home loan interest rates to fall before buying a house this year.
According to the survey, “Among those who are holding out for lower rates, a quarter (26%) want to see them below 5% before buying, which isn't expected to happen in 2024 or even 2025. About half (49%) are willing to wait for more than six months for rates to come down.”
What are the risks of waiting out mortgage loan interest rates? Are there any realistic problems that could come from this strategy?
Housing Demand May Rise in the Meantime
If you wait out the mortgage rates, one thing to remember is that increased competition is likely once rates do begin to show signs of a persistent lower trend.
If two-thirds of the house hunters in a given market are also waiting out rates, the rush to buy could create conditions close to the seller’s market of house hunting seasons past.
In a seller’s market, demand outstrips supply, making things less favorable for the buyer inclined to haggle. For example, a seller can refuse to sell to someone asking for a contingency clause dependent on the results of a home inspection.
Buying a house without having it inspected is a terrible idea, and no house hunter should agree to do so. But some borrowers feel more pressure to sidestep that process in a seller's market.
Housing Prices May Increase While You Wait
Don’t expect home prices to stay lower when there’s a rush of “wait-and-see” borrowers hitting the market once rates have persistently trended lower.
If you wait, are you in danger of paying more for the home? In some housing markets, the answer is a resounding yes. In others, there may be more flexibility.
But some can’t afford to wait and see. These borrowers may choose to find a deal in the current housing market. It may be wise to consider options such as an FHA adjustable-rate mortgage or purchasing a less-expensive fixer-upper using an FHA 203(k) rehabilitation mortgage.
Talk to a participating FHA lender about these options and what it means to buy a home as-is with a purchase loan versus buying a fixer-upper with a rehab loan. Some borrowers may find these options preferable to waiting for the market to return to more borrower-friendly levels.
------------------------------
RELATED VIDEOS:
Homebuyers Benefit From the Work Done by Fannie Mae
HUD 4000.1 is Sometimes Called the FHA Handbook
Credit History Is Presented as Your FICO Score
In that survey, nearly 70% of house hunters who responded say they are waiting for home loan interest rates to fall before buying a house this year.
According to the survey, “Among those who are holding out for lower rates, a quarter (26%) want to see them below 5% before buying, which isn't expected to happen in 2024 or even 2025. About half (49%) are willing to wait for more than six months for rates to come down.”
What are the risks of waiting out mortgage loan interest rates? Are there any realistic problems that could come from this strategy?
Housing Demand May Rise in the Meantime
If you wait out the mortgage rates, one thing to remember is that increased competition is likely once rates do begin to show signs of a persistent lower trend.
If two-thirds of the house hunters in a given market are also waiting out rates, the rush to buy could create conditions close to the seller’s market of house hunting seasons past.
In a seller’s market, demand outstrips supply, making things less favorable for the buyer inclined to haggle. For example, a seller can refuse to sell to someone asking for a contingency clause dependent on the results of a home inspection.
Buying a house without having it inspected is a terrible idea, and no house hunter should agree to do so. But some borrowers feel more pressure to sidestep that process in a seller's market.
Housing Prices May Increase While You Wait
Don’t expect home prices to stay lower when there’s a rush of “wait-and-see” borrowers hitting the market once rates have persistently trended lower.
If you wait, are you in danger of paying more for the home? In some housing markets, the answer is a resounding yes. In others, there may be more flexibility.
But some can’t afford to wait and see. These borrowers may choose to find a deal in the current housing market. It may be wise to consider options such as an FHA adjustable-rate mortgage or purchasing a less-expensive fixer-upper using an FHA 203(k) rehabilitation mortgage.
Talk to a participating FHA lender about these options and what it means to buy a home as-is with a purchase loan versus buying a fixer-upper with a rehab loan. Some borrowers may find these options preferable to waiting for the market to return to more borrower-friendly levels.
------------------------------
RELATED VIDEOS:
Homebuyers Benefit From the Work Done by Fannie Mae
HUD 4000.1 is Sometimes Called the FHA Handbook
Credit History Is Presented as Your FICO Score
Do you know what's on your credit report?
Learn what your score means.
