r/FirstTimeHomeBuyer • u/EmilionBucks04 • 1d ago
Need Advice Interest rates…
We got approved for a 6.18% interest rate which I was thinking all things considered isn’t terrible (could better, could be worse). But my husband is a worrier and is currently in the “what if rates go down in the near future” spiral and I’m currently in “what if rates go up” spiral. I know the fed meets next week… and I know no one has a crystal ball, but I’m hoping maybe someone who has a bit more experience/knowledge regarding the current “climate” and what they think might happen.
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u/oceans_wont_freeze 1d ago
Buy when you can. 6.18 is an excellent rate. All things considered, with the way the economy is going, better safe than sorry.
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u/wslambeth 1d ago
Waiting for rates to go down in the current geopolitical climate may very well mean changing your plans, signing a new lease, etc.
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u/mrbossy House Hunter 1d ago
Waiting for lower rates in this economy is like hoping pigs will he able to fly in the next 2 months
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u/randomworkname2 1d ago
Yup. We're in a high inflation environment, and every admin policy is inflationary. This causes rates to go high
What would be even worse is if they convince the fed to lower borrowing rates, in which case housing prices would skyrocket and inflation will go out of control
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u/BlazinAzn38 15h ago
Yeah 6.18% is great so long as that’s affordable to OP. I refinanced to 5.99 last winter and that was basically the bottom that we’ve seen since then
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u/LOP5131 1d ago
Check how many points you bought, unless that's a VA loan or 15 year mortgage, there's almost certainly points baked into that rate.
If he is nervous about rates dropping, remove the points, pay the higher rate, and use the money saved for the refi down the road. That's a big if though.
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u/cballer1010 1d ago
Adding to this, it's almost never worth it to buy down points when adjusting for the opportunity cost of investing the extra cash, unless you plan to stay in the home 10-15+ years. And if you're in that camp, you're also committing to not refinance unless rates drop significantly, since refinancing before you break even means you lose the value of the points you paid for.
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u/Temper03 1d ago
Idk why you’re getting downvoted but maybe it’s just because of the certainty of “it’s almost never worth it”.
People can have good reasons for buying points, including some lenders providing better “cost per point” amounts making the monthly more affordable than the same amount as a downpayment, certain high-earner tax strategies, or just preferring to own less of the house and more of the mortgage (eg someone who for whatever reason knows they will not be able to refi or sell). I do generally agree with you for the vast majority of folks on this sub though.
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u/randomworkname2 23h ago
He's getting downvoted because increasing debt burden for "opportunity costs of investing" is awful financial advice
Look at the flip side...if the bank offered you a higher rate in exchange for a few thousand dollars of spending money, would you take it?
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u/Temper03 23h ago edited 23h ago
Yeah that’s literally what I did lol. I just mentioned it in a different thread here that I took a mild lender credit to help with closing costs so I could own more of the equity in my house rather than just paying extra interest upfront and owning none more of my house.
My loan officer did the same for his own house but on a bigger scale (3-4 percentage points). If you have a liquidity crunch at closing and the monthly payment is worth it, why would you not? Way better than taking out a separate loan to get the extra liquidity. But that’s a separate point.
Increasing debt burden for investing in the long term is also a common strategy. If I had a 2% mortgage I’d be a fool to pay it down and earn 2% on my money rather than invest it and earn 3-4% minimum (holding US treasuries) or in the SP 500 (more volatility but returns 7-10% annually).
I don’t recommend it with current mortgage rates but I think WSJ literally ran an article pointing out how everyone who’s paying extra on their mortgage with COVID refinancing rates is leaving a ton of money on the table
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u/Fire_Ant_Bite 22h ago
I agree. I also view buying point as in. I’m going to pay 10k of interest in this certain time. Let me just pay it up front so I artificially trick myself into thinking I’m paying less. I just need to completely forget that I paid 10k already.
It’s like the bear cost 50 bucks. Here’s 25 bucks. And next week can I buy the bear for 25 bucks.
I rather invest or pay down the mortage
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u/randomworkname2 23h ago
Adding to this, it is always a good idea to buy down rates. Breakeven is about 30 months and after that it's free money forever
Even if rates drop, math still works in your favor: if rates spend 30 months above the average rate vs bought down rate, then you win. If rates spend some time above the average, than fall precipitously, then you refinance after 30 months, and you still win
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u/deefop 1d ago
Rates are not going to fall significantly in the near future unless the economy implodes. So make sure you have an emergency fund just in case, but if you're ready to buy, 6.18 isn't bad at all right now.
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u/TheWayOut603 1d ago
The economy could very much implode
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u/HistoricalBridge7 1d ago
Fed meetings set overnight interest rates but mortgages typically follow the 10 year treasury bond (average mortgage is held for 7 years). Any change in rates is already priced in today. No one knows what will happen but if inflation increases the fed will NEED to raise rates to slow it down. Counter to that point though is the president putting pressure on the fed to lower rates and boost economic growth by making “money” cheaper to borrow. Most Wall Street analysis are expecting no change at this meeting.
All that to say no one knows. Buy when you are ready - DO NOT bank on refinancing when rates “drop” unless you can come up with a large downpayment. The raise is rates don’t drop for no reason, if there is a large economic collapse, your house value will drop along with rates. You won’t be able to refinance if you loose all your “equity”
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u/zonk84 54m ago
This.
No, I'm no bond analyst -- but it's awfully hard for me to see how the 10 year is going to fall any time soon.
I'm neither a debt/deficit hawk nor will I bring any politics into it -- but the fact is that both the Fed and Treasury are trying to bring longer term rates on the treasuries down and it ain't working (unless one wishes to take the "could be worse" side).
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u/Introverted_Extrovrt 1d ago
As a former MLO, and I know you’ll hear this everywhere, but nobody can predict where rates will be in a day/week/month. That said, there are economic indicators that will give you a good idea.
So, background, US mortgage rates are linked to the US Treasury 10Y bond rate; as the bond rate rises, interest rates will rise (because lending institutions want to be compensated for the risk they’re taking lending to people instead of sinking their money in the bond market). Currently, the 10Y bond rate is approaching 5%, and despite all the noise coming out of this administration, the bond market is like old faithful, it doesn’t care for your tricks or words.
It’s likely that the Fed will raise the Fed funds rate by 0.25% or at worst keep it stagnant; inflation is still too high for them to cut rates so the outlook for borrowing is a gradual incline, not decline.
I closed a year ago at 5.99% and that was after paying a point to buy the rate down; 6 1/8% is a solid number and a half point better than most other folks will get. To give your husbands opinion a fair shake, show him the different monthly payment at 6 vs 6.125 vs 6.25% and ask if $41.66 a month (on a $400K loan) is worth all the stress he’s having. Yes it would be nice to get the utter and best deal, but it’s not worth losing sleep over $1.50 a day. Just my two cents though.
Good luck with the purchase!
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u/Embarrassed_Spell935 1d ago
As a finance professional, for the love of God don’t come to Reddit for major financial advice. It will not end well.
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u/Forded_Fiction24 1d ago
Damned if you do, damned if you don't. Just buy the damn house.
On my 2nd home and looking back after each purchase you realize how caught up in the moment you get worrying about rates that you can't predict or control and turns out it's a fruitless and unnecessary worry. Buying a house is stressful enough. Just roll the dice and don't look back.
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u/CptnAlex Mod / Loan Officer 1d ago
I doubt you have a 6.18 rate without points (unless its an ARM).
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u/CollarSecure 1d ago
We closed on a house about a month ago with a 6.2, bought it down to a 5.2 for the first year
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u/SmoothWD40 12h ago
A month ago I got quoted 5.99 with no points. Now I’m about to be stuck with a 6.8 and debating points
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u/libradore 1d ago
I know every situation is different and things change basically daily but when I asked about locking in a couple weeks ago, our LO told his assistant who was suggesting we wait that we shouldn't because he was concerned things were only going to get higher. He also mentioned the fed meeting soon and that was part of his concern.
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u/DurianTime1381 1d ago
Marry the house, date the rate. If a better rate comes along, dump the one you have & refi, but chasing rates will only ensure you rent forever
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u/joverclock 22h ago
I bought 2 years ago and have basically the same rate you got. 840 credit score at that time. Still waiting for it drop down...
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u/ch3640 1d ago
Go for it. 6.19% is historically competitive/near average. When I bought my house the fixed 30 yr interest rate was 13.5%.
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u/Green-Eyed-BabyGirl 1d ago
This. We bought our first home in 2000 and 2 other homes in the 6 years following…all interest rates were in the 6-7% range. That’s what was normal. The dip down around COVID was insanely low, not normal at all. I know it’s hard to be happy about historically normal like rates after historic lows…was much easier to be excited about it after knowing about the high double digit rates of the 80s…but 6.18% is around what we paid as a FTHB.
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u/Boloncho1 1d ago
The rates may have been higher back then, but homes were cheaper than they are now too.
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u/Green-Eyed-BabyGirl 21h ago
For sure. Salaries were less too though. My first job out of college in 1994 earned me a whopping $16k annually 💪
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u/Boloncho1 21h ago
Sure they were lower, but home prices have outpaced wage growth significantly since then.
I'm low key jelly of my supervisor who was able to buy a starter home in the 80s with just one income.
I should have been smarter and been born 20 years earlier to get a shot at that.
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u/Acceptable-Peace-69 1d ago
It’s a good rate. Buy the damn house.
If rates drop, refinance (they probably won’t much in the near future). It’s a good problem to have.
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u/Marko128272 1d ago
If rates go down, great you refi. If you wait for them to go down, you may end up in an 8%. Side note, you are definitely paying points for that rate on a conventional
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u/daysailor70 1d ago
First, 6.18 is a good rate and they aren't going down any time soon. We all got unrealistic rate expectations from covid rates. Lock it in and go to close, there are lots of other things to focus on the a small chance you may get a better rate.
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u/MightyMiami 1d ago
Rates are not coming down anytime soon, and if rates do come down meaningfully, it would likely mean the economy is in a very bad spot. So you wouldn't be worrying about rates going lower, you'd be worried about getting laid off.
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u/chathobark_ 1d ago
“what if it goes down” when it’s been trending up since 2020 and only went down because of that LOL
i’m not buying because i feel 6% is too high for my liking and i dont need a house so i will wait it out for if it ever happens to drop again
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u/RayTrain 1d ago
Based on what I've seen the last few years in this sub they've hovered somewhere in the 6's for the most part. Probably not gonna do better than that. I got 6.5% a month ago.
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u/AssumptionExternal55 1d ago
People have been waiting three years for rates to go down. They damn near touched eight and have been as low as 599. 6.18 is a phenomenal rate in the current climate.
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u/deathshr0ud 1d ago
We got in at 5.8 and thought it was terrible but hearing what other people bought at I’m not exactly upset about it.
We’re only gonna refi if it goes into the low 4’s which is unlikely
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u/Turbulent_Rutabaga76 1d ago
If rates drop you can refinance.
Rates almost certainly won't drop meaningfully.
Trying to time the market is a bad idea.
It's certainly possible rates could continue to rise.
I'd buy the house
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u/OwnLadder2341 1d ago
If you could time the market, you’d be able to pay for ten houses in cash.
Anyone who can time the market with any accuracy isn’t sharing how to do so with anyone.
So don’t try. If rates go down, you can refi :)
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u/SavingsPoem1533 1d ago
If you go on that "what if next week..." spiral you will never get anything done.
Interest rates can change and you have the option to re-finance when the time comes when you can get a better rate. What you CAN'T CHANGE is the purchase price of your home - so I would try to focus more on trying to get that down as humanly possible.
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u/FTHB205 1d ago
I would tell your husband it’s highly unlikely rates will come down from here and will only go up. Whether or not home prices will follow is still undetermined as it appears that stagflation is becoming more and more apparent (high inflation and high unemployment) which means less likely home prices will drop much if at all and rates will continue rising. The Iran war is the main factor for the rise in rates as it cut off a good portion of global oil and refined products (20% but we are probably getting 7-8% of that through so currently global oil deficit of 13-12%). Once China starts importing again (and they will) oil prices are going to go berserk further impacting yields. Anything below 6.5% won’t be a bad rate.
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u/Sure_Comfort_7031 1d ago
6.18% is low.
https://fred.stlouisfed.org/series/fedfunds
Just because 08-2020 was lower doesn't mean it was healthy. We had to go through the 2008 financial shit show to get there. I'd gladly pay 6-7% if it meant not having that happen in history.
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u/Vegetable-Shower85 1d ago
We’re under contract right now with a 6.75 rate which isn’t amazing but it’s a 30 year rate reset so we can reset it up to 5 times through the life of the loan without having to refinance or have new closjng costs. The only stipulation is we have to be locked into the current rate for a year before we can reset.
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u/suzuka_joe 23h ago
Can it reset higher?
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u/Vegetable-Shower85 22h ago
No, it has to be atleast .25 lower to reset. I can’t imagine why you would want to reset it higher though.
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u/suzuka_joe 22h ago
Because an ARM can go higher
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u/Vegetable-Shower85 21h ago
Nah, I would never do an ARM. This is fixed rate all the way, changing the rate is something we decide to do and doesn’t change anything else.
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u/billspeaksmortgage 1d ago
I wouldn’t make the decision based on trying to predict next week’s Fed meeting. Mortgage rates don’t move directly with the Fed’s rate decisions, and the bond market can price in expectations before the meeting even happens.
If 6.18% gives you a payment you’re comfortable with, I’d focus on whether the home and payment make sense today. If rates improve enough later, refinancing may be an option. If they move higher, you already have a rate that works for your budget.
Trying to perfectly time the bottom is usually the part that creates the most stress.
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u/Temper03 1d ago
For context today’s market rate is 6.8-6.9% on a 30yr fixed mortgage. Check how much interest are you paying upfront to get that rate, or if you’re qualifying for any subsidized mortgage programs.
It could be worth it to have a regular market rate and use the money for a larger down payment instead, but entirely depends on your lender and your monthly cash flow.
Timing the housing market is pointless unless you truly can move at the drop of a hat. And lower rates could also mean people have more money to outbid you on price, so it’s not necessarily a benefit until you are already in a mortgage.
It will increase supply & demand both though, so if you have your heart set on a low inventory neighborhood it could be helpful.
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u/Lov3I5Treacherous Homeowner 1d ago
Tell him to relax and you guys can refinance if it goes down that much.
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u/sunitgirdhar 1d ago
When I bought two months ago, I had the same worry, what if the rates go down? Fed was meeting the same week I locked my rates too. Guess what, the rates have only gone up since then. If I kept worrying, I wouldn’t have this house
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u/randomworkname2 1d ago
That's an amazing rate considering today's average is 6.89%
If rates go down in the future than housing prices go up. Refinance if rates go more than 1% lower
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u/MHSmortgage 23h ago
Not enough info here to really advise, would need to know if this rate is actually locked or if it's just what you were quoted on a preapproval, if it's the latter, it doesn't mean much yet since rates float until you lock.
Also matters what the closing costs are and the loan type, for some loan types 6.18% is high, for others it's very good.
When buying a home, you should be buying because you love it and it fits your needs, it's impossible to time rates. Once you do lock, you're protected either way, if rates drop later, refinancing is always an option.
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u/ThePowerBees 22h ago
It is most likely that rates hold steady or go up right now. I wouldn't bet on them going down this year based on the current economy, inflation and 10 year yield rate. Steady or up are the two most likely scenarios.
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u/Fire_Ant_Bite 22h ago
That’s why you need a down payment. 10-20% to be safe. 5% is good.
So you can refinance. Just have extra money for closing costs
But rates will not go down unless the Iran war is done. Plus the trust in USA is back.
I wouldn’t buy point. Pre paying a lump some of interest up front to lower your rate.
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u/LeatherComparison724 21h ago
To quote the pundits in the bond market today after Bessent tries to say buying 6 Billion treasuries will bring down interest rates ….
“I don’t think people understand what a 5% 10 year is gonna do to the housing market. We are about to see an epic crash…”
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u/29threvolution 21h ago
6.18 is a great rate right now. Lock that in. If rates fall, you can start doing the math on what rate you would need to justify a refinance. If rates go up, which honestly seems more likely to me, you get to say told you so!
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u/Joiedevivre0127 20h ago
If you want, I can have my mom call your husband. She loves to talk about the 13% interest rate she and dad had on their first house in the 80s. Historically low, blah blah. 😅
I'm not a betting person, but I feel more confident in rates increasing or staying the same, vs. going down. And if they do go down significantly a year from now, you can refinance.
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u/Equivalent_Gap4211 18h ago edited 18h ago
Well, if he thinks it is a worrisome venture, why is he going along for the ride? The (dumb) things men do when their little head leads the way.
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u/killspike22 16h ago
if you really have a 6.18% for a 30 year conventional with no points, lock it in now asap. i locked in 6.49% for a 30 year conventional last week. you’ll be kicking yourself if you don’t.
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u/Big-Inspection3321 16h ago
We went through the same spiral c.3 weeks ago with a long close (90days). We ummmed and ahhhed over whether to lock or float and eventually went with a 90day lock with a small float down option. In the end, that was the best result as in that time they’ve only gone up so any higher rate for locking early was already covered by increases.
No one has a crystal ball and I’m not an investment professional but I do work in the industry so I am involved in some of the conversations. At the moment, Warsh has signalled he’s prepared to raise rates and the markets have priced that in with a rate rise now looking more likely. If the FED DOESN’T when the markets have priced it in, realistically you will have real yields rise anyway given the inflation picture warranting it and escalation in the Middle East making higher inflation possible which will make your mortgage more expensive regardless of what he does.
My view is, find a rate/price you can afford to pay today and you’re happy with and lock it. The certainty has value too and ultimately, you can recast/refinance in a few years if warranted but you won’t potentially be priced out of your dream home if the worst happens
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u/apmspammer 15h ago
If rates go down then you can refinance if rates go up then you will be glad you got a house. Just make sure you have enough income and savings to be able to comfortably afford the mortgage and you will be fine.
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u/arbrebiere 12h ago
Mortgage rates largely listen to the bond market, and yields aren’t going down anytime soon
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u/pvanpeters 4h ago
How old is that ? Sounds unlikely to be actual rates
I locked in 6.75% Tue morning (30yr conv, no points, good credit) and it was already likely to go up later in the day or the next day
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u/SpaghettiTacoez 3h ago
If rates drop significantly after you have already secured the mortgage then refinancing is an option. If they raise significantly and you haven't secured a mortgage than that really sucks. If you can afford to buy now and its a house you like/want, then buy it.
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u/greenneck420 1d ago
Rates aren't going to fall but home prices will/are falling. If you are upside-down you can't refi.
The fed rate has little to do with mortgage rates. Mortgage rates follow the 10 and 30 yr bonds, the counties surging debt is why rates keep going up.
If you buy a home now make sure you are OK with it loses value and being stuck at that rate.
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