More than a year of rising interest rates, aand have only made buying a home even more expensive for Americans today.
Coming off of historic lows,are around 6% to 7% APR. But as shows signs of cooling and the Fed slows down rate hikes, many potential homebuyers may be optimistic about where rates could go over the next several months.
It's unlikely we'll reach pandemic-era rates below 3%, but could Find the most competitive mortgage rates you can qualify for here now.as the rate environment evolves through 2023? Not sure what rate you could qualify for?
Could mortgage rates drop in 2023?
Despite an interest rate pause in June,again after the Fed's July meeting. Even with another rate hike on the horizon though, the Fed has signaled that it could be ready to ease rate hikes as inflation cools.
"My educated guess is that mortgage rates are near their peak as the Fed is nearing the end of its rate hike cycle and inflation has come down significantly since 2022," says Jake Northrup, CFP, founder of Experience Your Wealth.
However, that doesn't necessarily mean that mortgage rates will soon decrease. It's likely the Fed will hold rates high for a while before officials are ready to begin rate cuts. Then, finally, "Once the Fed eventually starts to reduce interest rates, you'd expect to see mortgage rates decline," Northrup says.
The good news? Chances are good that mortgage ratesthis year, even if they don't actually start lowering until late 2023 or 2024.
"I think rates are likely to remain relatively flat through the rest of 2023," says Al Faber, CFP, senior wealth manager at Woodson Wealth Management.
Faber cites not only the Fed's rate decisions but other economic factors that influence rates, too. "It seems that we are approaching the end of the Fed's rate hike cycle," he says. "As student loan repayments begin to have a dampening effect on consumer demand, we might see the markets get a bit skittish on recession fears, which should also help soften mortgage rates."
Despite elevated rates, there are good options for homebuyers today. Start comparing rates you may be eligible for here now!
What to know if you're buying a home today
Despite the current high interest rate environment, many experts we've spoken to agree: Youif you're in the market for a home now. It's impossible to predict when or by how much rates might be reduced and waiting could mean missing out on your dream home. Plus, you can begin sooner. But there are ways you can improve the application process and your chances of qualifying for the best rate possible.
"Before applying for a mortgage, I recommend having a sufficient down payment and ensuring your credit score is in the best shape possible," Northrup says.
You can check your credit report for free through each of the three major credit bureaus. Look for any errors on the report and take action early on to beginif you need to.
Also make sure you plan the application against your other financial goals and obligations. "Don't make big money movements or purchases before or during the approval process," Faber says.
That's because applying for other loans or lines of credit could temporarily reduce your credit score. When you're financing a mortgage worth hundreds of thousands of dollars, even minute changes in your rate can make a big difference in what you pay over time.
Finally, make sure you shop around for the best rate you can qualify for.
"Get multiple quotes from multiple lenders before moving forward with one," says Bill Nelson, CFP, founder of Pacesetter Planning. "If you get multiple quotes all at the same time, it won't count as multiple checks against your credit. A home is the biggest thing that most people will ever buy; if there's ever a time to price shop, it's when you are taking out a mortgage."
The bottom line
The interest rate tides could change, but you may still have toto see mortgage interest rates go down by a significant amount. But with no guarantee mortgage rates see a large drop this year or further into the future, you may be better off taking action now. Focus on the factors within your control. If you're in the market for a new home, make sure you're taking steps to improve your credit and research your options, so you can score the on your mortgage and save long-term.
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