If you’ve been house hunting this fall, you’ve felt it. The average 30-year mortgage rate is 7.40% this week. It held there after seven straight weeks of increases, and a year ago it was 6.27%.
Most of the homes that closed in August and September were locked back in the summer, when rates were closer to 6.5%. So if you’re shopping now, the numbers you ran a few months ago are probably out of date.
What the jump actually costs
On a $400,000 loan, principal and interest at 7.4% comes to about $2,770 a month. At 6.5%, it’s about $2,528. That’s roughly $240 a month, close to $2,900 a year, from the rate alone. Taxes, insurance, and HOA dues come on top of that.
Why rates went up
Mortgage rates track the 10-year Treasury yield more closely than anything the Fed announces. The 10-year averaged 5.28% the week of October 8, and Realtor.com economist Joel Berner pointed to inflation expectations, a broad bond market selloff, and rising federal deficits. Oxford Economics expects rates to stay above 7% through the end of the year. Nobody can promise where they go after that, and I won’t pretend to.
Should you wait?
There’s no universal answer, but here’s how I’d think about it.
Waiting makes sense if today’s payment stretches your budget, if you don’t have to move, or if you’re still building your down payment.
Buying now can make sense if you find the right home and the payment works today. Buyers have more room to negotiate than they’ve had in years. In the Dallas-Plano-Irving metro, inventory reached 4.2 months in the first quarter. In May, the median home took 54 days to sell in Dallas County and 43 days in Collin County. And the area’s median price dipped 3.2% year over year to $399,000. That leverage tends to shrink when rates fall and buyers rush back in.
If rates do drop later, refinancing is an option. It comes with its own closing costs, though, so treat it as a possibility, not a plan.
Where the rates under 5% are
New construction. Some builders in Prosper and Celina have been offering mortgage rates below 5%, and on some homes, discounts approaching $100,000.
To put that in numbers: the same $400,000 loan at 4.99% comes to about $2,145 a month in principal and interest. That’s about $625 less than at 7.4%.
How a buydown works
When a builder “buys down” your rate, they pay your lender up front to lower it. There are two main kinds:
- Permanent buydown: the lower rate lasts for the life of the loan.
- Temporary buydown, often called a 2-1: the rate starts lower for the first two years, then steps up to the full rate. Before you sign, make sure you can comfortably afford the payment at the full rate, not just the starter rate.
What to ask before you sign
- Which lender? Builder incentives are almost always tied to the builder’s preferred lender. Get quotes from at least two other lenders and compare the total cost of the loan, not just the rate.
- Permanent or temporary? A 4.99% rate for two years and a 4.99% rate for thirty are very different deals.
- Can the money flex? Ask whether the incentive can go toward the rate, closing costs, or upgrades, and which gets you the most.
- Protect your credit during the build. Credits are often contingent on keeping your credit score where it was when you signed.
- Read the tax bill. Many of these new communities sit inside a MUD or PID, an extra tax that can eat into your rate savings. I wrote up how those work, and what they add to your payment.
The bottom line
A 7.4% rate is a real jump, but it isn’t the whole story. Buyers have leverage, builders are paying to bring rates down, and the right home at a payment you can carry is still the right home. If you want to run the numbers on a specific house or neighborhood, reply to the newsletter or reach out. I’m happy to walk through it with you.
This post is general information, not financial advice. Rates and builder incentives change weekly. Talk to a licensed lender about your situation.
Know the Neighborhood, Not Just the House
I’m Jamie Marancenbaum, and I help people buy and sell homes across the DFW area. A good move is about more than square footage and comps. It’s about the streets, the schools, what’s being built down the road, and the stories behind the places you drive past every day. That’s what I write about here, and it’s what I bring to every client.
Thinking about buying, selling, or just curious what your home is worth today? Get your free home value at jmarancenbaum.cbapex.com, or reach me anytime at (469) 417-9661 or [email protected].
Jamie Marancenbaum, REALTOR® | Midtown Market Group | Coldwell Banker Apex | Texas License #0645858
18260 Preston Road, Suite 110, Dallas, TX 75252
Richardson | Prestonwood | Far North Dallas | Addison | DFW Area
More than real estate. It’s Home.
