Many homebuyers are hoping for a substantial drop in mortgage rates, but experts predict that any decline will be modest, possibly not as significant as some might have hoped. While rates are expected to decrease, they will likely level out around 6.5% by year’s end.
Recent forecasts from Fannie Mae, the Mortgage Bankers Association (MBA), and Wells Fargo offer these projections for 2025, broken down by quarter:
- Q1: 6.96%
- Q2: 6.86%
- Q3: 6.68%
- Q4: 6.53%
If you’re waiting for significantly lower rates, you may need to adjust your expectations. Life changes, such as a new job or growing family, could mean you can’t afford to delay your home purchase. Fortunately, there are other ways to make homebuying more affordable, even if rates don't fall dramatically. Here are three creative financing options to consider:
- Mortgage Buydowns: You can pay an upfront fee to temporarily lower your mortgage rate. This is especially helpful for first-time buyers seeking lower monthly payments. In fact, 27% of agents report that many buyers are asking sellers for buydowns.
- Adjustable-Rate Mortgages (ARMs): ARMs often offer lower initial rates, making them a good choice if you expect rates to decrease further or plan to refinance. Today’s ARMs are more secure than those from the mid-2000s, as lenders ensure borrowers can handle higher future rates.
- Assumable Mortgages: With an assumable mortgage, you can take over the seller’s existing loan, including their lower mortgage rate. Over 11 million homes qualify for this option, making it a worthwhile option if you’re looking for a better rate.
Rather than waiting for mortgage rates to drop significantly, consider exploring alternatives like buydowns, ARMs, or assumable mortgages to make homeownership more affordable now. Speak with your lender to determine which option works best for you. If you have any questions, feel free to reach out to me and we can discuss.
