With mortgage rates back near 7%, many buyers are wondering whether it still makes sense to keep looking. The answer depends on your timing, resources, and goals — but higher rates do not automatically mean you are out of options.
Interest rates have recently moved back to around 7% or more for a 30-year fixed-rate mortgage, which can significantly increase a buyer’s monthly costs. But if this is the right time for you to move, higher rates do not have to end your search. There are creative financing options beyond the standard 30-year fixed-rate mortgage.
Adjustable-rate mortgages are one common alternative. ARMs are typically about 0.75 percentage points lower than fixed-rate mortgages and usually reset after 5 or 7 years. Because the rate can rise after the initial period, it is important to track fixed-rate options and consider refinancing if fixed rates become at least 0.75 percentage points lower than your ARM rate.
If you have the resources, you could increase your down payment to reduce or eliminate financing. This is not an option for everyone, but it may be worth discussing with a financial advisor or lender. You may also be able to finance the property later, after closing.
If you have other liquid or semi-liquid assets, there may be a way to sell or borrow against those assets and avoid or reduce the mortgage, and replenish the asset later on. There may some significant tax advantages to doing that as well. You should consult a financial advisor or lender for this issue as well.
If your family has significant available assets, you may want to explore whether a family member could gift you funds to purchase a home, with a separate agreement to finance and repay them later when rates are more attractive.
Here are a few lenders who may be able to help you explore creative options in a higher-rate environment. I do not have any arrangement with them; they are simply lenders who have helped buyers succeed when rates are higher.
Cristen Hodges, Wells Fargo. Excellent service, creative solutions
Danny Sasson, an exceptionally knowledgeable lender with Citizen’s Bank who have some interesting programs.
Amer Jan, a local lender with Citi whose clients really like him. Citi is one of the largest lenders.
James Chen, a superb lender with lots of experience and integrity with Cliff Co, who have some unique lending programs.
Daniel Menendez, a lender at City National who have some great first-time home buyer and other downpayment help options.
You can also discuss options with your current financial advisor or lender. The important thing is to know that a fixed-rate mortgage is not your only option, and higher rates do not have to stop you if you need to move.
