Rates Are Up. Your Plans Don't Have to Be Off.

Let's talk about the number everyone is staring at.

Mortgage rates climbed again. The average 30-year fixed rate hit 7.28% on October 1, according to Freddie Mac. A year ago, it was 6.34%. If that made your stomach drop a little, you're in good company.

I've heard it from buyers and sellers all week. "Should we wait?" "Did we miss our chance?" "Is anyone even buying right now?"

Here's my answer. A higher rate changes the math. It doesn't cancel the plan. And for a lot of people in West Michigan, this market has more opportunity in it than the headlines suggest.

Let me show you why.

First, the Real Numbers

I'm not going to tell you rates don't matter. They do.

On a $300,000 loan, the monthly principal and interest payment is about $2,053 at 7.28%. At last year's 6.34%, it was about $1,865. That's roughly $188 more each month for the same loan.

That's real money, and it deserves a real plan. The good news is that a higher-rate market hands you tools a low-rate market never does. We'll get to those.

A Little Perspective Helps

The 3% rates of 2020 and 2021 were not normal. They were the lowest on record, and they didn't last.

Freddie Mac has tracked mortgage rates since 1971. Over that time, the average 30-year rate has been just under 8%. In the early 1980s, it topped 18%. People still bought homes. They still raised families in them and built wealth in them.

Today's rate feels high because we remember 3%. Measured against the last fifty years, it's pretty ordinary.

Why Rates Move in the First Place

Mortgage rates aren't set by one person in one room. They follow the bond market, which reacts to inflation, the job market, and what investors expect the Federal Reserve to do next. When inflation worries pick up, rates tend to rise. When things cool down, they tend to ease.

That's why rates change every week. It's also why nobody can tell you exactly where they'll be next spring. A plan built on today's numbers will serve you better than one built on a forecast.

The Rate on the News Is Not Your Rate

That 7.28% is a national average. Your rate depends on you.

•     Your credit score. Higher scores earn lower rates. Even a small bump can help.

•     Your down payment. More money down usually means a better rate and a smaller loan.

•     Your loan type. Conventional, FHA, and VA loans are all priced differently.

•     Your lender. Quotes vary more than people expect. Comparing two or three lenders can save you real money.

You can improve some of these in a few months. Paying down a credit card or fixing an error on your credit report can move your rate more than waiting on the market ever will.

Buyers: Here's What Higher Rates Give You

When rates rise, some buyers step back. That changes things for the ones who stay.

•     Less competition. Fewer buyers means fewer bidding wars. You get time to think, and you're less likely to pay over asking just to win.

•     Room to negotiate. Price, repairs, closing costs, and timing are all back on the table.

•     Your inspection is back. A couple of years ago, buyers were waiving inspections to compete. Today you can do your homework before you commit.

•     Sellers who will help with your payment. This is the big one, and it gets its own section.

The Tools Most Buyers Don't Know About

You are not stuck with the rate on the news. There are several ways to bring your payment down, and sellers are more open to them right now.

Seller credits toward your rate. A seller can give you a credit at closing, and you can use it to buy down your interest rate for the life of the loan. Here's a rough example. Say you negotiate $6,000 from the seller on that $300,000 loan. Take it off the price, and your payment drops about $41 a month. Use it to buy your rate down by about half a point, and your payment drops about $100 a month. Same dollars, more than twice the relief. Every lender prices this differently, so have yours run both options.

A temporary buydown. With a 2-1 buydown, your rate is two points lower in year one and one point lower in year two. On our $300,000 example, that's about $390 less each month the first year and about $200 less the second. It's a softer landing while you settle in, and the seller can pay for it.

Refinancing later. If rates come down, you may be able to refinance into a lower one. There are costs, and nobody can promise where rates will go. But the option exists. As a simple illustration, refinancing that $300,000 loan from 7.28% to 6.28% would lower the payment by about $200 a month. Your purchase price is permanent. Your rate doesn't have to be.

Down payment help. Michigan has down payment assistance programs that many buyers qualify for and never ask about. A good lender will tell you in one conversation whether you're one of them.

Questions to Ask Your Lender

You don't need to be a mortgage expert. You just need the right questions. A good lender will welcome every one of these.

•     What is my rate with and without points?

•     What would a 2-1 buydown cost, and can the seller pay for it?

•     How much is a seller allowed to contribute on my loan type?

•     Do I qualify for down payment assistance?

•     What is my full monthly payment, including taxes and insurance?

•     How long is my rate lock, and what happens if rates drop before I close?

What Waiting Really Costs

Waiting feels safe. It isn't free.

•     Rent keeps going out the door. A year of rent is a year of payments that build someone else's equity.

•     Prices haven't dropped. Home values in West Michigan have held up, even with higher rates. A lower rate on a higher price is not always a win.

•     When rates fall, everyone comes back. The buyers on the sidelines today will return at the same time. That means more competition, more offers over asking, and fewer concessions.

Nobody can time rates. Not me, not your lender, not the experts on TV. What you can do is buy a home you love at a payment you're comfortable with. That works in any market.

Three Myths I Hear Every Week

"You need 20% down." You don't. Conventional loans can start at 3% down for first-time buyers and others who qualify. FHA loans start at 3.5%. VA loans offer zero down for eligible veterans and service members.

"I should wait until rates drop." Rates may drop. Competition tends to rise when they do, and prices often follow. Waiting trades one cost for another.

"A higher rate means I can't afford a home." It may mean a different price point, a different loan, or a seller credit. It doesn't automatically mean no. Run the numbers before you rule yourself out.

Sellers, This Part Is for You

I know what you're thinking. "Nobody is buying." And right behind it, "I can't give up my rate."

Let's take those one at a time.

People are buying. Life doesn't check mortgage rates first. Babies arrive. Jobs change. Parents move closer. Kids move out. The buyers in this market are serious ones. They've already run their numbers, and they're ready when the right home shows up.

Your rate is one number. If you've owned your home for a few years, you likely have real equity in it. That equity can become a larger down payment on your next home, which means a smaller loan and a payment that may surprise you. A low rate is nice. It shouldn't keep you in a house that no longer fits your life.

You're buying and selling in the same market. If you give a little as a seller, you can ask for the same as a buyer. The concessions that help your buyer are available to you on the other side.

The Move-Up Math

Here's an example I walk sellers through all the time.

Say you sell your current home and walk away with $120,000. You find your next home for $400,000. With that equity as your down payment, you borrow $280,000. Your principal and interest payment is about $1,916 a month at today's rate.

A buyer putting 5% down on that same house borrows $380,000 and pays about $2,600 a month.

Same house. Same rate. Very different payment. Your equity does the heavy lifting, and the rate matters less when the loan is smaller.

How to Sell Well Right Now

Homes are still selling in West Michigan. The ones that sell fastest have a few things in common.

•     Price it right the first week. Buyers are doing payment math on every home they see. An overpriced home gets skipped. A well-priced one gets attention.

•     Make it easy to say yes. Clean, bright, and well maintained wins. Buyers with higher payments have less left over for projects.

•     Offer a credit before you cut the price. Remember that $6,000 example? A credit toward the buyer's rate can do more for their payment than a price drop of the same size. It can also cost you less than the reduction you were considering.

•     Stay flexible. On closing dates, on repairs, on terms. Flexibility is free, and buyers remember it.

So, Is It a Good Time?

It depends on your numbers, not the headline.

If the payment fits your budget, the home fits your life, and you plan to stay for a while, a higher rate is something to plan around. It is not a reason to put your life on hold.

If the numbers don't work today, that's worth knowing too. Then we make a plan for when they will.

Either way, you'll be deciding with facts. That beats deciding with fear every time.

Quick Answers to Common Questions

Is it a bad time to buy a house when mortgage rates are high? Not necessarily. Higher rates raise your payment, but they also bring less competition and more room to negotiate. The right time depends on your budget and how long you plan to stay.

Will mortgage rates go down next year? Nobody knows. Rates follow the bond market and the economy, and forecasts change often. Plan around a payment you're comfortable with today.

What is a rate buydown? It's an upfront payment that lowers your interest rate. It can be permanent, for the life of the loan, or temporary, like a 2-1 buydown that lowers your rate for the first two years.

Can a seller pay for a buyer's rate buydown? Yes. A seller can offer a credit at closing that goes toward it, within the limits of your loan program.

Should I sell if I have a low mortgage rate? It depends on whether your home still fits your life. Your equity can offset a higher rate on the next one, so look at the full picture before you decide.

Final Thought

Rates go up. Rates come down. People keep needing a place to call home.

The buyers and sellers who do well aren't the ones who guess the market perfectly. They're the ones who understand their options and move when it makes sense for them.

If you've been sitting on the fence, I'd love to help you look at your real numbers. Send me a message and let's sit down.