When home prices are on the rise and mortgage rates remain elevated, many first-time homebuyers can feel like homeownership is out of their reach. When it comes to buying a home today, there’s more to the story. Obtaining an affordable mortgage isn’t a pipe dream; lenders have had several years to adjust to higher interest rates. What we’ve seen since is a collaborative effort among lenders, builders and local governments to introduce creative lending solutions.
For current homeowners considering a move, the upside is that when home prices are high, there’s a potential for a good return on equity, resulting in a sizable down payment. However, the concern many potential sellers face is trading in their current interest rate for one that could be nearly twice as high.
This shouldn’t deter potential sellers. Yes, you may have locked in a historically low rate when you bought or refinanced between 2012 and 2021, but it’s important to remember these are not record-breaking high rates. According to Freddie Mac, the average 30-year fixed rate in 2008 hit 6.45%. In 2000, it was 8.62%. The average rate was 12.7% in the 1980s, 8% in the 1990s.
First-time homebuyers find themselves in a different situation. They may lack the down payment that comes with substantial equity from selling a home, but on the flipside, they don’t have a current mortgage rate they are scared to let go of. Any concern likely comes from knowing that not long ago, interest rates were around 3%. They’re also facing the continued rising costs of goods and services.
For a first-time homebuyer or anyone selling and buying a new home, waiting around for rates to drop is not a risk worth taking. When rates begin to drop, other waiting buyers will begin to buy, depleting inventory and ultimately driving prices even higher due to demand. You could miss out on the home of your dreams, even though the mortgage could have worked for your budget.
If you’re ready to buy your first home or make a move, there are options. There are many incentives, grants and flexible lending options available for all types of mortgages. First-time homebuyers can take advantage of grants and incentives that help with initial costs, such as down payments. For example, the Arvest Opportunity Fund offers the Arvest Homebuyer Advantage, a specialized mortgage product designed to bridge the gap for those who may not meet traditional credit requirements. By pairing with the Freddie Mac Home Possible® mortgage, this program allows qualified buyers to purchase a home with no down payment and avoid private mortgage insurance (PMI). To ensure long-term success, the program also includes a dedicated homebuyer education and credit review process, empowering buyers to build a solid financial foundation as they move into their new homes.
Builders are also using incentives to entice buyers, including options like temporary buydowns, where they work with a lender to buy down a rate for the homebuyer for a certain period of time, such as three years. This temporarily gives the buyer a lower mortgage rate to help with affordability.
The key thing to remember is that rates are cyclical. When they drop, you may be able to refinance to a lower rate. Whatever your current situation, Arvest wants to help you understand your options and look beyond the interest rate. Contact an Arvest mortgage lender today to discuss what is right for you.
