How to Buy a House Without Waiting for Rates to Drop?

Many people hope mortgage rates will fall before they buy a home. But will that actually happen? According to the latest projections, experts say rates will fall, but not as much as many people would like.

The good news? Even if they don't come down substantially, there are still ways to make buying a home more affordable.

How much will rates go down?

A few months ago, experts were predicting that mortgage rates could fall below 6% by the end of the year. But recent projections suggest that may not happen.

While mortgage rates are still expected to decline somewhat later this year, projections from Fannie Mae , the Mortgage Bankers Association (MBA), and Wells Fargo now show them stabilizing near 6.5% by the end of the year.

That means if you're putting off buying a home in hopes of much lower mortgage rates, you may have to wait some time. And if you need to move because something in your life has changed, such as a new job, the birth of a baby or a marriage, waiting that long may not be a good option.

Creative Financing Options in Today's Market

Since rates aren't expected to drop as much as originally expected, it may be worth considering alternative financing options that could help you get into a home sooner rather than later. Here are three strategies to discuss with your lender to see if any of these make sense for you:

1. Reduction of mortgage interest

A mortgage buydown allows you to pay a fee up front to lower your mortgage rate for a set period of time. This can be especially helpful if you want or need a lower monthly payment right from the start. In fact, 27% of agents say first-time homebuyers are increasingly asking sellers for buydowns to purchase the home right now.

2. Adjustable Rate Mortgages

Adjustable-rate mortgages ( ARMs ) typically start at a lower mortgage rate than a traditional 30-year fixed mortgage. This makes them an attractive option, especially if you expect rates to drop in the coming years or plan to refinance down the road.

And if you remember the housing crash, you should know that today's ARMs are nothing like the risky ones back then. Lance Lambert, Co-Founder of ResiClub , helps drive this point home by saying :

“… Today’s ARM products are different than many of the products issued in the mid-2000s. Before 2008, lenders often approved ARMs based on borrowers’ ability to afford the lower initial interest rates. And sometimes they didn’t even check (remember Ninja loans). Today, adjustable-rate borrowers qualify based on their ability to afford a higher monthly payment, not just the lower initial payment.”

In simple terms, banks used to make loans without checking whether buyers could repay them. Now, lenders verify income, assets and employment, which reduces the risks associated with ARMs compared to the past.

3. Affordable mortgages

An assumable mortgage allows you to take over the seller's existing loan, including their lower mortgage rate. And with more than 11 million homes qualifying for this option according to US News , it's worth exploring if you want or need a better rate.

In conclusion

Waiting for a big drop in mortgage rates may not be the best strategy. Instead, options like buydowns, ARMs, or assumable mortgages could make homeownership more affordable right now.