4 smart things homebuyers should do with inflation up again
Homebuyers have had a rough few years. After mortgage rates plummeted in 2020 and 2021 thanks to the pandemic they rose quickly in 2022 and 2023 in response to decades-high inflation. That led to them hitting their highest point since 2000 - where they have remained since. And until inflation falls into check, it's unlikely that they'll come down in any significant way, either.
Unfortunately, that rate relief appears delayed after the latest inflation report released this week showed inflation increasing to 3.2% in February. That's up from January's 3.1% and still more than a full percentage point above the Federal Reserve's target 2% rate goal. Rate cuts once thought to be a guarantee in the first half of 2024 now may not come until much later than initially expected.
While this is unwelcome news for homebuyers — and owners looking to sell their existing properties — there are still things buyers can do to improve their situation while waiting for a change to the rate climate. Below, we'll break down four smart things homebuyers should do with inflation up again.
Start by seeing what mortgage rate you could qualify for here today.
4 smart things homebuyers should do with inflation up again
Are you a homebuyer in today's market? Make these four moves now that inflation has risen again.
Work on your credit
While today's mortgage interest rates are higher they are just the average, meaning that you could be stuck with an even higher rate than what you see advertised. The best rates and terms will be reserved for those borrowers with the highest credit scores and cleanest credit profiles.
So, if you're waiting for rates to fall, use that time to boost your credit score as high as possible. Not only will it position you to lock in a low mortgage rate, but it will also help you when applying for other credit forms, too.
Learn more about your mortgage options here today.
Shop around for lenders
Once you've got your credit in shape you'll want to shop around to find the best lender for your loan. While most will generally offer you similar rates and terms, even a slightly lower rate between lenders can make a significant difference — especially when added up over a 30-year mortgage loan term length. Just be sure to look at all of the potential costs as fees and closing costs could offset some of the reduction you get in a rate.
Consider alternatives
A traditional 30-year mortgage loan isn't your only option. Some alternatives could result in you getting a lower interest rate. These options, however, won't come entirely risk-free. An adjustable-rate mortgage, for example, may come with a lower introductory interest rate but it will rise over time unless refinanced.
Buyers can also purchase mortgage points to get a lower rate but it will cost them — either as a fee they pay upfront at closing or rolled into the overall mortgage loan. Still, the savings that either option offers can be valuable for the right buyer. Use this time to determine if makes sense for you, too.
Lock in a rate
Mortgage rates change daily and can be affected by multiple factors. But with the interest rate climate not ideal right now — and the prospect of a rate cut dimmer than it was at the start of the month — it may be smart for some buyers to lock in a mortgage rate now, before they climb higher.
If rates drop before they close on their new home they could always unlock their rate and relock the new, lower one. Or they could refinance to a lower rate in the future. But by waiting and doing nothing buyers could be setting themselves up to get stuck with a higher rate.
The bottom line
While stubborn inflation won't help homebuyers looking for a rate break, there are still options to investigate that may help. By working on their credit, shopping around for lenders, considering alternative mortgage types and discounts and locking in a rate now buyers will position themselves for major savings — both with the rate they get today and with what they pay over the life of the loan.
