Experts say that everyone knows that when it comes to investing in the stock market, one should not try to time the market, but this should also apply to buying a house.
Rates below 6.50% for a 30-year fixed mortgage may still seem high to many potential home buyers, but experts said that shouldn’t decide whether to buy a home. This is less than a year ago and probably much less than what our parents paid. According to Freddie Mac, the average rate since 1971 is just under 8%.
Rates may be a little lower this year, but if you find the right home that you can buy now, housing experts say do so.
“The key thing is not to wait for the right rate,” said Jeff Dergurahian, chief investment officer and chief economist at non-bank retail mortgage lender LoanDepot. “For homebuyers, the message is simple: focus less on waiting for the right rate and more on finding a home that fits your budget and long-term plans.”
Isn’t the mortgage rate important when buying a home?
The mortgage rate is important in calculating what the monthly payments will be and the total cost of the home over time, but experts say it is only one of many factors.
“Many buyers are still hoping for low rates, but it’s important to remember that rates are only one part of the affordability equation,” said Bob Johnson, head of residential mortgage lender and loan servicer NuRease. “If rates fall meaningfully, increased demand could put upward pressure on prices in some markets.”
Additionally, the promoted rate is average. Experts say potential buyers with good credit can get lower rates and better terms.
Lenders use credit scores as a measure to decide whether to approve a loan and on what terms, including interest rate. A high credit score tells lenders that you are at lower risk of defaulting on your mortgage. According to Equifax, most conventional mortgages require home buyers to have a minimum 620 credit score for approval, but some first-time homebuyers may qualify for special government-sponsored loans with more lenient approval requirements.
How can Americans improve their credit scores to get the best rates?
The first step is to know your credit score. A survey by credit scoring agency FICO revealed that a quarter of Americans don’t know their FICO score.
Once you know your credit score, make a plan to improve it. Often, renters don’t even realize that paying rent on time can help your score, FICO said.
“The path to homeownership starts with understanding your financial readiness,” said Janelle Ditto, vice president of consumer empowerment and partnerships at FICO. “It’s best to start monitoring your score at least six months before starting the process, which will give you time to make meaningful financial improvements. Actively tracking your financial habits – and identifying where there is room for improvement – is an effective way to build your credit and secure better terms with a lender.”
Once you’ve built your credit score, shop around for the best rate. Experts said multiple mortgage-related credit inquiries within a short period (usually 45 days) are treated as a single inquiry when calculating your score.
“Shopping around has little to no negative impact — and even a small difference in interest rates can translate into thousands of dollars over the life of the loan, making it worth the effort,” Ditto said.
Aren’t house prices still rising?
Experts say home prices are still rising, which could increase affordability issues, but at a slower pace.
“Although home purchase prices have generally been high in recent years, the pace of appreciation appears to be slowing,” Johnson said.
According to NewRez’s June survey, the average purchase price for first-time buyers is expected to increase by about 6% from 2024 to 2025, while increasing by about 11% from 2023 to 2024. The annual purchase price increase for frequent home buyers halved, from about 10% to 5%.
“While affordability remains challenging, the market is showing signs of becoming more predictable,” Johnson said. “Buyers may have more opportunities today to evaluate their options and make thoughtful decisions than during a period of rapid price increases.”
Buyers should also remember that if rates drop, they can always refinance.
“If you find a home that works for your budget today, it may still make sense to move forward with the purchase, especially knowing that mortgage rates may eventually go down, creating an opportunity to refinance to a lower payment later,” Dergurahian said. “It’s less like trying to time the market right and more like making sure the home, the payment, and your long-term plan all fit together. While every market is different, housing is one of the greatest long-term assets you can own.”
Medora Lee is the money, markets and personal finance reporter at USA TODAY. You can reach him at (email protected) and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
Reporting by Medora Lee, USA TODAY Network via Reuters Connect