Many Americans have shrugged off rising costs and interest rates and said that 2023 is the year to buy a home, according to a recent TD Bank survey.
Among respondents looking to purchase a home for the first time in 2023, 39% said now is a good time to buy and 48% have already begun saving for their down payment.
However, the optimism comes mixed with some reservations, with 69% of respondents concerned over where the economy is headed and 64% worried about how rising mortgage rates may impact affordability, the survey said.
“Even as rates have risen in comparison to the historically low-interest rate environment many experienced in the past two years, buyers see the importance of building equity in a home purchase,” TD Bank Head of U.S. Residential Lending Steve Kaminski said in a statement. “Homeownership has and continues to be a sustainable way to build intergenerational wealth, while providing the added benefit of shoring up a buyers’ financial position over the long-term.”
If you are looking to take advantage of lower mortgage rates by refinancing your mortgage loan, or are ready to shop for the best rate on a loan, consider visiting an online marketplace like Credible to compare rates, choose your loan term and get preapproved with multiple lenders at once.
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Buyers adjust to new normal for mortgage rates
Mortgage rates have shifted down over the past five weeks but remain considerably higher than they were a year ago. It is likely, however, that as the Federal Reserve continues to raise interest rates to keep to its goal to bring inflation to a 2% target rate, mortgage rates will continue to fluctuate in the 6% to 7% range it has been for the past eight months, according to Keeping Current Matters Chief Economist, George Ratiu.
“While rates are still considerably higher than a year ago, markets are beginning to adjust to the new normal,” Ratiu said in a statement. “Rates have spent the past 12 months mostly above 5%, making today’s levels more acceptable and lessening some of the initial shock consumers experienced in 2022.”
Buyers surveyed said that because of higher mortgage rates, they have adjusted their approach to provide some flexibility in the home buying process, according to TD Bank. More than half (59%) said they are in the market for a fixer-upper or starter home and 52% of this group said their decision was based on current market conditions.
Additionally, 27% of the respondents said they planned to refinance their mortgage when rates came down.
“Depending on a buyer’s personal financial situation, how long they expect to be in the home and other risk-based considerations, there may be alternate mortgage options to consider in the near- and long-term when it comes to financing a home,” Kaminski said. “But it’s always important to talk through those options to weigh the benefits and risks with a mortgage professional early in the process.”
If you want to take advantage of interest rates before they potentially go up, you could consider shopping for the right mortgage. Visit Credible to speak with a mortgage expert and get your questions answered.
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Buyers need to fully understand the homebuying process
When it came to the valuing importance of buying a home, 85% of the survey respondents said that it was a good long-term investment. Buyers can get ahead of rising rates and costs by doing due diligence around homeownership, TD Bank said.
Equally important is breaking away from these common myths that homeowners should look to avoid as they begin the process:
Myth #1: Down payments need to be 20%
Forty-four percent of respondents said that saving for a down payment was a barrier to purchasing a first home and 81% of low-to-moderate-income (LMI) respondents ranked this as one of the top three barriers to buying a home.
Being informed means knowing about the several flexible down payment assistance programs available that allow borrowers to provide as little as 3% down when purchasing their first home, according to TD Bank.
Myth #2: All lenders are the same
Many buyers compare rates when choosing which lender to work with, but there should be other considerations. Your lender can give you a snapshot of what you can afford, potential closing costs and which first-time homebuyer assistance programs you are eligible for.
“Against the backdrop of higher rates, continued inflation, and low housing inventory, it is especially important for consumers to speak with mortgage professionals and realtors early in the process to create a well-adjusted budget and identify a comfortable price range for their homebuying search, better positioning them to compete and make an offer on the home that meets their unique goals,” Kaminski said.
The slowdown in home prices and lower interest rates have made buying a home more affordable for some. If you are ready to shop for a mortgage loan or are looking to refinance an existing one, you can use the Credible marketplace to compare rates and lenders and get a mortgage preapproval letter in minutes.
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