September 8, 2023
For some, buying a home in 2023 is a bad idea. At least, that is the impression some get when looking at today’s high interest rates in the third quarter of the year.
Some compare these numbers to the rates available a year or two ago and wonder why they should consider buying a house in today’s market.
Saying no to an FHA home loan in these circumstances could be the right answer for those without a refinance strategy to help them get out of today’s higher rates as soon as lower interest rates are offered consistently.
But what about those who think long-term and have a strategy to refinance their home loan as soon as it’s feasible?
FHA Loans And Housing Market Competition
Major news outlets reported mortgage loan rates “pulling back” for a few weeks in the third quarter of 2023, but that move did nothing to encourage borrowers to apply for new home loans. In fact, demand for mortgages has declined in the short term. That is something that could prove to be a key development for some potential FHA loan applicants.
In a seller’s market (one that has a great deal of competition for the existing inventory of homes)you might not have much negotiating leverage with the seller.
Try negotiating a lower price in a seller’s market and you may likely fail, the same as when asking for seller concessions under similar circumstances. The seller simply doesn’t have to budge on price when so many people want the same property.
But when housing demand falls, as it has in recent weeks (at press time) according to reports from CNBC, some house hunters will take full advantage of that lack of competition. They can negotiate more with a seller that doesn’t have three others all offering money for the house.
Buy Now With A Refi Strategy
You likely have read elsewhere that a good strategy for buying a home with high rates is by purchasing the home using an FHA adjustable rate mortgage.
Why do so? Because your introductory rate on an FHA ARM loan may be lower than the fixed interest rate option and this can cut your interest costs over time.
The FHA ARM loan intro rate can last between one year and 10 years, so it’s a good idea to ask a lender about how an ARM can save in this early stage of the loan.
ARM borrowers typically think about refinancing once the intro rate comes to an end, and that’s an option that can potentially help lower your rate even more when the time is right.
This strategy is not for everyone. It requires more effort to monitor your finances and to be more proactive about watching the rise or fall of interest rates after you have closed the loan. But the extra effort may be worth the savings.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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