By Fay B. Silverman, AMS Branch Manager in Virginia

Headlines are screaming “Mortgage interest rates are at their highest levels in years” and “Housing prices are increasing as the inventory of available homes is low.”

That’s some scary stuff, especially for a first-time military buyer who’s not sure where to start. Do I have enough to put down? Is my credit score high enough? How do I find the right VA lender?  We have content on our website to help with these questions or you can reach out to an AMS Military Mortgage Advisor to help you. But until you do that, we can help assure you of a few things right now.

Your concerns are real. A recent report by the National Association of Realtors® (NAR), dated September 2023, found prospective homebuyers across races and ethnicities say the top three reasons they have not bought a home are:

• They’re waiting for mortgage rates to drop
• They’re waiting for home prices to drop
• There’s not enough available homes to buy within their budget

High Rates, Supply Issues, and Rising Home Prices

In early September 2023, the 30-year fixed-rate mortgage (FRM) averaged 7.19%, according to Freddie Mac. That sounds high because just three years ago, in 2020, rates were at new lows, with the 30-year fixed rate diving to just under 3%, according to Bankrate data.

But if you look further back in time, you may gain additional perspective. In October 1981, the 30-year fixed mortgage rate reached 18.4%, according to Freddie Mac. Compared to a rate of 18%, 7% starts to look more enticing. Plus there are ways to get your rate down even more if your credit score is high or if you buy (pay) discount points. Discount points are fees paid to the lender in exchange for a lower interest rate on the loan. These points are also tax deductible as long as they are charged as a percentage of the loan amount and are not based on the value of the property. Be sure to check with your tax advisor.

But will rates drop, and when? That’s the million-dollar question these days and something the experts aren’t agreeing on. The Mortgage Bankers Association (MBA), a professional group, had expected the 30-year fixed rate to fall below 6% by the end of 2023, but recently revised that finding to predict the average rate will stay above 6% until early 2024. Fannie Mae predicts mortgage rates will average 6.6% in 2023 and 6.3% in 2024, and doesn’t expect rates to dip below 6% until 2025.

So does that mean to wait? No siree. In fact, doing so could put homeownership further out of reach. Because of low-inventory conditions, home prices are expected to continue to rise in 2024, according to Freddie Mac, Zillow and the NAR. With too few homes for too many buyers, NAR expects home prices to rise by 2.6% in 2024.

While this situation may prop up home prices, homes are starting to sit on the market longer, and we are seeing many homes reduce sales prices. Instead of multiple offers, sellers may see one or two. Consequently, buyers are again in the driver’s seat. Sellers are more flexible and offer to help pay some closing costs and buyers are again asking for home inspections.

Related: 5 Home Problems You Need to (and Should) Walk Away From

If You’re Ready, Buying Is the Right Move

Consider what this means — will interest rates drop enough to offset rising prices? Let’s say you find a perfect home listed for $300,000. With a 30-year VA Home Loan at 100% financing and fixed rate of 7.25% (7.252% APR), your monthly principal and interest (PI) payment would be $2,091*. Now let’s say the housing market reignites and home values increase 5% to $315,000 and rates go down modestly to 6.75% (6.752% APR). With a 30-year VA Home Loan at 100% financing and the lower fixed rate, the PI monthly payment is now $2,087*. The difference in the payment is a marginal $4.

If you are financially prepared, now may be a good opportunity to save money, start building equity, and enjoy additional seller contributions like paying some or all of your closing fees — money that might be used to improve the home, update appliances, install a fence, lay new flooring or carpeting or keep for a rainy-day fund. Plus, homeownership lets you start to build equity and generational wealth, makes you part of a community, and gives you a valuable asset to rent or sell should the time come to do so.

We’re Here to Help with Your Mortgage

Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

Ensuring AAFMAA Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or call us at 844-422-3622!

*Mortgage payment considers a minimum 720 credit score and first-time VA funding fee and does not include taxes, HOI, flood, HOA, or other fees.