Navigating the best time to close on a house can be challenging in the best of times, but finding the right time has been even more difficult since 2022. That’s when the housing market started facing structural issues not seen since the housing crisis during the Great Recession.
Sustained mortgage rate increases, dwindling housing inventory, rising competition, and a lack of housing affordability have dampened home-buying activity as buyers attempt to wait out these market challenges.
However, financial expert Dave Ramsey shares why buyers should commit when they’ve found the right home within budget, not when the market dictates it.
Don’t miss the move: Subscribe to TheStreet’s free daily newsletter
Buying a home is often a multi-decade financial commitment, so it is essential to research mortgage lenders and ensure the monthly mortgage payment doesn’t exceed 25% of your income.
However, buyers who have paid off all debt, saved up a substantial down payment, and found the right house in a high interest rate market are not locked into their mortgage indefinitely. There is always the option to refinance their mortgage when rates eventually come down.
Ramsey explains how to get the most competitive interest rate despite months of surging mortgage rates.
A young family in their new home. High mortgage rates have made it difficult for first-time home buyers to purchase a home, but Dave Ramsey shares tips for getting the best interest rate in this market.
Shutterstock
Mortgage rates may be elevated, but there are ways to get competitive rates
The 30-year fixed rate mortgage dropped to 6.96% this week, showing a minor improvement but still up almost a whole percentage point since September. Mortgage rates have not fallen as quickly as most housing experts and consumers had hoped after the Fed’s three interest rate cuts last year.
As mortgage rates remain elevated, sellers already locked into low mortgage rates are reluctant to put their homes on the market, and buyers are hesitant to commit to a mortgage carrying interest rates almost four percentage points higher than just a few years ago.
Although it would be ideal to get the lowest interest rate possible, it is important to work with the present housing market conditions, as there is no set timeline for when interest rates will fall to a more favorable level.
More on homebuying:
Housing expert reveals surprising ways to reduce your mortgage rateAmericans buying homes may see major housing cost changes in 2025Dave Ramsey has a warning for Americans buying a home now
“Of course, just like you can’t time the stock market, it’s nearly impossible to time your home purchase with the best interest rates,” Ramsey wrote.
Most analysts predict that mortgage rates will average 6.5% this year, tapering to around 6% by year-end but never falling below that mark. Since consumers may be waiting several years, he highlights two easy ways for buyers to obtain a competitive interest rate in this market.
“A benefit of the 15-year fixed mortgage is that it has a lower interest rate than a 30-year fixed mortgage,” he continued. “Sometimes a bigger down payment can also help you get a better interest rate.”
Though both of those options require a bit more money upfront, they will save buyers tens of thousands of dollars in interest in the long run.
Mortgage rate locks protect buyers from rate fluctuations
While mortgage rates likely won’t fall below 6% this year, they tend to vary on even a weekly basis. Housing demand, economic conditions, fed interest rate cuts, and the 10-year treasury bond yield influence mortgage rate changes.
Locking down a competitive interest rate can help buyers avoid volatility in the home-buying process.
Related: Dave Ramsey warns Americans to avoid this huge mortgage mistake
Home buyers can lock a mortgage rate for 30 to 120 days and may be subject to a fee, depending on the lender and loan terms. However, it can cost more to lock a rate for more than 60 days, so it’s recommended to lock rates near the closing date.
Ramsey highlights that the home-buying process can be lengthy, with no guarantees. If there is a rate you and your lender are comfortable with, it makes sense to lock it down.
“Mortgage interest rates go up and down and there’s no way to time it perfectly. You simply don’t know what the future holds — no one does,” he explained. “So don’t spend time trying to time the market; instead, rely on your lender’s expertise. If they say it’s a good time to lock down your rate, trust them.”
Related: Veteran fund manager issues dire S&P 500 warning for 2025
