As of September, mortgage rates have been relatively steady, but they've trended up a little this week and are now the highest they've been for a year in a row.
While borrowers can't control the macroeconomic conditions that have led to higher mortgage rates, they can do some things with their own finances to ensure they snag the lowest rates available.
MyFICO recommends 30-year mortgage rates for borrowers with a credit score of at least 760 for a $300,000 loan. The average rate of those with a score of 620 - the minimum credit score required to get a conventional mortgage - will be 8.724%.
Increase your credit score to keep your mortgage payment low, even when rates are sky high.
As an online mortgage calculator, you can compare how current interest rates will affect your monthly payments.
You'll also be able to see how much you'll pay over the entire term of your mortgage, including how much goes toward the principal vs. interest.
The mortgage rates grew from historic lows in the second half of 2021 and went up more than three percentage points in 2022.
But many forecasts forecast that rates will begin to fall this year. In their latest forecast, Fannie Mae researchers forecast that 30-year fixed rates will decline throughout 2023 and 2024.
If the Federal Reserve can manage inflation, whether mortgage rates will drop in 2023, the Federal Reserve will be able to control inflation.
The Consumer Price Index rose by 3.7% in the last 12 months. While inflation has slowed since its peak a year ago, we still need to see a bit more slowing before the Fed considers cutting rates.
A home equity line of credit may be a good option for homeowners looking to leverage their home's value for a significant purchase - like a home renovation - while we wait for mortgage rates to ease. As a consumer, browse our list of HELOC lenders to begin your search for the right loan for you.
A HELOC is a credit line that allows you to borrow against the equity in your home. It is similar to a credit card in that you can borrow what you need instead of getting the full amount you're borrowing in a lump sum. It allows you to tap into the money you have in your home without affecting your entire mortgage, like you would do with a cash-out refinance.
In contrast to other loan options, HELOC rates are relatively low compared to credit cards and personal loans.
Late last year, home prices fell, but we aren't likely to see huge drops this year, even if there's a recession.
Fannie Mae researchers expect prices to rise 3.9% in 2023, and the mortgage bankers association expects a 0.5% increase in 2023 and a 1.1% increase in 2024.
The sky high mortgage rates have forced many hopeful buyers away from the market, slowing homebuying demand and causing a decline in home prices. rates may start to drop soon, which would remove some of that pressure. The current supply of homes is historically low, which will likely keep prices from declining too far.
When a recession happens, house prices usually drop, but not always. It usually happens because fewer people can afford to buy homes, and the low demand forces sellers to lower their prices.
Obtaining a mortgage calculator can help you determine how much you can afford to borrow. Play around with different costs and down payment amounts to determine how much your monthly payment might be, and consider how it affects your overall budget.
Typically, experts recommend spending less than 28% of your gross monthly income on housing expenses. The entire monthly mortgage payment, including taxes and insurance, should not exceed 28% of your pre-tax monthly income.
Shop around and preapprove with multiple mortgage lenders to see which is the best rate for your situation, as the lower your rate will be able to borrow. But remember to not borrow more than what your budget can comfortably handle.