Should You Buy A House When Mortgage Rates Are High?

Should You Buy A House When Mortgage Rates Are High?

Mortgage rates are the highest in the past 18 months as I write this blog. There. I said it.

Now that we’ve acknowledged the giant number staring at everyone from their mortgage calculator, should you wait to buy a house? Maybe. But before you decide to put your home search into witness protection until mortgage rates come down, there’s a better question to ask.

Does buying a house make sense for you right now? Because mortgage rates are only one part of the equation.

Yes. Higher mortgage rates affect your monthly payment. Nobody is disputing basic mathematics. But making a homebuying decision based entirely on the interest rate is a little like choosing a restaurant based entirely on the price of the bread. It’s relevant. It’s probably not how you should make the entire decision.

What are you paying for the house? How much competition are you facing? Can you negotiate with the seller? How much cash will you have left after closing? How long do you expect to own the property? What are you currently paying for housing? If mortgage rates eventually decline, could refinancing change your numbers?

Let’s start with purchase price.

Suppose a house is listed for $500,000. In a slower market, maybe you negotiate the seller down. Maybe you get a seller credit toward closing costs. Maybe you can negotiate repairs. Maybe you have enough time to walk through the house twice before someone screams, “Highest and best by 4 pm.”

Now suppose mortgage rates decrease significantly. What would you do? There’s a decent chance you’d become more interested in buying. So would a lot of other people who have spent the last two years telling everyone at dinner that they’re “waiting for rates to come down.”

Lower mortgage rates can improve affordability and potentially bring additional buyers into the housing market. If inventory doesn’t increase along with demand, competition for desirable homes can increase.

Suddenly that house you’ve been watching isn’t sitting there waiting for you anymore. Steve loves the house. Steve waived the appraisal. Steve’s agent is calling the listing agent every seventeen minutes. Nobody likes Steve.

What is better? Paying a higher mortgage interest rate today while potentially having more negotiating leverage, or waiting for a lower rate and potentially competing against more buyers?

The answer depends on the property, your local housing market, your finances, and what happens with rates.

In other words, nobody knows. That’s why trying to perfectly time the housing market can drive you insane. You don’t need to predict the market. You need to understand the transaction sitting in front of you.

That brings us to the question that matters more than whether today’s mortgage rates start with a number you like.

Can you comfortably afford the monthly mortgage payment?

Notice the word comfortably.

There is a difference between qualifying for a mortgage and actually wanting to make that payment every month.

A lender might approve you for a certain mortgage amount. That doesn’t mean you should immediately spend every dollar you’re approved to borrow.

Remember…your mortgage payment is competing with the rest of your life. Restaurants exist. Vacations exist. Kids exist. And apparently, every homeowner eventually develops a financial relationship with Home Depot.

Your housing payment may include principal, interest, property taxes, homeowners insurance, mortgage insurance, and association dues (if applicable). Then you have utilities, maintenance, repairs, and everything else that comes with owning the property.

Forget about what mortgage rates might do next year for a minute. Can you afford the house today?

If your plan requires rates to drop six months after closing because the current payment is uncomfortable, that’s not really a strategy. That’s hope.

A future refinance should be viewed as an opportunity. It shouldn’t be life support for the original mortgage.

Could mortgage rates decline? Absolutely! Could they stay higher longer than people expect? Absolutely. Could economists spend another twelve months explaining why their previous twelve month forecast didn’t happen? History suggests we shouldn’t rule it out. Nobody knows exactly where mortgage rates will be six months, twelve months, or three years from now.

If I buy this house and mortgage rates don’t improve anytime soon, am I still comfortable owning it?

If the answer is yes, now refinancing becomes an opportunity. Your purchase price gets established when you buy the property. Your financing can potentially change later.

If mortgage rates eventually decline enough to justify the cost of refinancing, you may have an opportunity to lower your monthly mortgage payment or restructure the loan. Maybe that happens in a year. Maybe it takes longer. Maybe it never makes financial sense. That’s why you don’t buy a house based on a refinance that hasn’t happened yet.

You buy based on today’s numbers. Then you evaluate tomorrow’s opportunities when tomorrow gets here.

Cash reserves are another part of the conversation that doesn’t get nearly enough attention.

Suppose you have $100,000 available for your home purchase. Should you put every possible dollar into the transaction? Maybe. However, what does your bank account look like the morning after closing? Because your house doesn’t care that you just spent most of your savings buying it.

Your air conditioner isn’t going to look at your closing disclosure and say, “Craig had a pretty expensive month. I’ll give him another year.” It will die on Tuesday. Probably when it’s 112 degrees outside. The water heater may join it out of solidarity. Welcome to homeownership!

That’s why the question isn’t simply how much money you need to buy the house. How much money will you have after you buy it? There is a significant difference.

Then we need to talk about how long you expect to own the property. Are you buying a house you expect to own for two years? Five years? Ten years? Are you buying because the property actually fits your life, or because someone convinced you that adulthood requires a mortgage and garage full of things you haven’t used since 2023?

Buying and selling real estate involves transaction costs. The shorter your expected ownership period, the more those costs can matter. A longer ownership period gives you more time to spread those expenses across your ownership and experience whatever happens with home values and mortgage rates.

That doesn’t mean your home is guaranteed to appreciate. It means your timeline matters.

There’s another question people often forget. What happens if you don’t buy?

You still have to live somewhere. If you’re renting for $3,000 per month and buying the property you want would cost $3,800 per month, don’t simply ask whether $3,800 is expensive.

Ask what you’re getting for theadditional $800. More space? A yard? A better location? A home office? Pool? Stability? No upstairs neighbor practicing bowling at midnight? Maybethose things are worth $800 per month to you. Maybe they aren’t. That’s your decision.

The point is that you’re comparing two actual options instead of comparing today’s mortgage rate to a rate your friend’s cousin got in 2021.

Please stop doing that to yourself. Different market. Different property. Different borrower. Different loan. Different universe.

So, should you wait for mortgage rates to come down before buying a house? Maybe.

If today’s payment stretches your budget, your savings aren’t where you want them, your income situation could change, or you simply haven’t found a property you actually want to own, waiting can make complete sense.

There is no trophy for buying a house before you’re financially ready. But what if you’re financially prepared today? What if you find the right property? What if you can comfortably afford the monthly mortgage payment? What if you still have a healthy cash reserve after closing? What if you can negotiate the purchase price, closing costs, repairs, or seller concessions because fewer buyers are competing against you? Does a higher mortgage rate automatically make that a bad transaction?

Stop asking whether this is “the perfect time to buy.” Perfect according to whom?

Ask whether this particular house, at this particular purchase price, with this particular monthly payment, makes sense for YOUR financial situation. Not your neighbor's.

That’s something we can actually calculate together.

Look at the purchase price. Look at the mortgage payment. Look at your cash needed to close. Look at the money you’ll have remaining. Look at how long you expect to own the property. Look at what you’re paying for housing today. Then look at what happens if mortgage rates don’t decline.

If you still like the numbers, you have something worth evaluating.

If the entire plan only works if rates fall, the house appreciates, your income increases, your property taxes never change, nothing breaks, and the financial universe cooperates perfectly with your excel spreadsheet…you probably just answered your own question.

You don’t need to predict mortgage rates to decide whether you should buy a house. You need to understand your numbers because the best time to buy isn’t when CNBC, your uncle, TikTok, your neighbor, or some guy who bought three houses in 2011 tells you it’s time.

It’s when the property and the numbers make sense for you.