Many people are hoping for a drop in mortgage rates before they buy a home, but will that actually happen? According to the latest predictions, experts suggest rates will decrease, but not by as much as many expect.

The good news? Even if rates don’t fall as much as anticipated, there are still ways to make buying a home more affordable.

How Much Will Mortgage Rates Actually Drop?

A few months ago, experts thought mortgage rates could dip below 6% by the end of the year. However, more recent forecasts show that rates are likely to stabilize closer to 6.5% instead.

If you’ve been holding off on buying a home, hoping for a more significant drop in rates, you might be waiting longer than you expected. And if your life situation has changed, such as a new job, a growing family, or a marriage, waiting for rates to drop significantly may not be an option.

Creative Financing Options to Consider

Since mortgage rates aren't expected to drop as much as originally hoped, it could be a good idea to explore other financing options that might allow you to purchase a home sooner. Here are three strategies you should discuss with your lender:

1. Mortgage Buydowns

A mortgage buydown allows you to pay an upfront fee in exchange for a lower mortgage rate for a set period. This can help reduce your monthly payments early on, making it easier to afford a home. Many first-time homebuyers are opting for buydowns, with 27% of agents noting this request from buyers.

2. Adjustable-Rate Mortgages (ARMs)

An adjustable-rate mortgage (ARM) usually starts with a lower interest rate than a fixed-rate mortgage, making it an attractive option if you expect rates to decrease in the future or plan to refinance down the line.

Unlike the risky ARMs from the mid-2000s, today’s ARMs are much safer. Modern ARMs require borrowers to prove they can afford higher monthly payments, not just the initial lower rate. This change reduces the risks associated with ARMs compared to the past.

3. Assumable Mortgages

An assumable mortgage allows you to take over the seller’s existing loan, including their lower interest rate. With over 11 million homes qualifying for this option, it’s worth considering if you're looking for a better rate.

Bottom Line

Waiting for a significant decline in mortgage rates may not be the best strategy. Instead, exploring options like buydowns, ARMs, or assumable mortgages could help make homeownership more affordable right now. Speak with a local lender to find the best solution for your situation.

How will these options impact your homebuying plans this year?