Mortgage Rates: Holding Steady at High Levels |

For homebuyers, the dream of homeownership might come with a slightly bigger hurdle this year. Mortgage rates, which directly impact the monthly payment you'll make on your loan, are expected to remain high throughout 2024.

Why are mortgage rates so high?

The Federal Reserve plays a key role in setting interest rates. In order to keep inflation under control, the Fed has raised interest rates. These higher rates trickle down to mortgage lenders, who then raise their own rates for borrowers.

How high are mortgage rates right now?

As of June 2024, a 30-year fixed-rate mortgage, a popular choice for homebuyers, is averaging around 7.10% [Bankrate]. This means that for every $100,000 you borrow, you'll pay roughly $7,100 in interest each year.

What does this mean for homebuyers?

Higher mortgage rates translate into higher monthly payments. Let's say you're looking to buy a $300,000 home. With a 7.10% interest rate and a 30-year loan term, your monthly payment would be around $1,900. If rates were lower, say at 5%, your monthly payment would be closer to $1,600. That's a significant difference that can impact your budget.

Will mortgage rates go down anytime soon?

Experts predict that mortgage rates will likely stay elevated throughout 2024. However, there is a chance they might ease down a bit by the end of the year. This depends on how effectively the Federal Reserve combats inflation.

What can homebuyers do?

If you're planning to buy a home, here are some steps you can take:

Shop around for the best rates. Different lenders offer different rates. Don't settle for the first offer you receive. Get quotes from multiple lenders to compare rates and terms.

Improve your credit score. A higher credit score qualifies you for better interest rates. Work on improving your credit score by paying bills on time and keeping your credit utilization ratio low.

Consider a shorter loan term. Shorter loan terms, like 15-year fixed mortgages, typically come with lower interest rates. While the monthly payment might be higher, you'll end up paying less interest overall.

Save for a larger down payment. A larger down payment reduces the amount you need to borrow, which can improve your loan-to-value ratio and potentially qualify you for a lower interest rate.

The takeaway

While high mortgage rates might present a challenge, it shouldn't necessarily deter you from buying a home. By carefully planning your finances, shopping around for the best rates, and considering different loan options, you can still achieve your dream of homeownership.

Remember, even small adjustments to your down payment or loan term can make a significant difference in your monthly payment.


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