What to Do if High Mortgage Rates Are Pricing You Out of Buying a Home

Millions of homebuyers have been waiting for home prices to fall so they can finally get into the red-hot housing market. However, prices remain stubbornly high, according to the National Association of Realtors.

In fact, May was the first time the median existing-home sales price was above $400,000.

Meanwhile, even if sellers eventually cut prices, mortgage rates have been climbing sharply this year, keeping monthly housing costs high.

But don’t give up hope. Here are some things you can do to save more money today as you fight back against higher mortgage rates.

Watching interest rates climb can be a bummer if you’re trying to get a loan for a home, car, or other expensive purchase. But increasing rates could be a good thing for those putting money into a bank.

Rising rates can mean better interest on bank products such as high-yield savings accounts. That means banks may pay you more to keep a savings account with them. Talk to your bank or credit union about whether it offers a high-yield savings account. Then, begin saving for a future down payment in this account.

Pro tip: Make sure you put your money in one of the best savings accounts to get the highest earnings rate.

If you put more money down on a home, you won’t have to borrow as much from the bank at a high mortgage rate. Think about different options to save cash or adjust your budget to focus on saving for a down payment instead of spending the money somewhere else.

Also, being willing to buy a lower-priced home means your down payment will be able to work harder for you than if you buy a higher-priced home.

A new or updated home may have all the options you want, from stainless steel appliances in the kitchen to updated bathrooms. But those updates are going to cost you money.

Instead, consider a fixer-upper, which may need some work to get it up to your standards. You should be able to get a better deal on a home like this.

Not all areas have the same cost of living, and there may be ways to relocate and buy a home in an area where costs are cheaper.

Living in an area with a lower cost of living may also help you save on other things such as food, gas, and amenities.

If you can’t find a way to buy a home now, try to find a cheaper place to rent so you can save some money and build up a good down payment for a later date.

You may want to take on a side hustle to make extra cash that you can add to the money you save on rent. Any additional cash you can save while renting can be used later when you’re ready to buy.

To get the best mortgage rates, you need pristine finances. Getting rid of debt is one way to shore up your finances.

So, before you apply for a loan, figure out ways to crush your debt. Try to eliminate debt before you set money aside for a down payment.

A buydown is the option to get a lower mortgage rate by paying points at closing. The lower rate may last for a few years or the entire life of the loan.

This may be a good option if you already have money in savings that you can use to your advantage when you’re ready to close on your home.

It may sound defeatist, but it might be a good idea to wait out interest rate hikes and do nothing in terms of buying a home for now.

Think about how much house you can afford or what kind of mortgage rate you may be eligible for. Don’t jump in simply because you’re worried about rising rates. You might find out too late that you can’t afford your new home because you forgot to account for other fundamental costs.

Rising interest rates can be frustrating for potential homebuyers who may have already been putting off buying a house due to high costs. But there may be ways to work around higher mortgage rates and other issues if you get priced out of the housing market by interest rates

Thinking in a different or creative way about potentially buying a home could work to your advantage. If you are priced out right now, save for a future down payment, take steps to crush your debts, and wait for a better day to buy a home.