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8 Tips for Buying a House When Interest Rates Are High [+ Pros & Cons]

Home buyers in recent years have faced exorbitant prices, fierce bidding wars and interest rates that will be remembered as some of the lowest in history — before skyrocketing to some of the highest. The latter remains one of the greatest hurdles to overcome, leading many people to question whether buying a house with high interest rates is worth it.

First, it’s important to get a sense of the economic scene in recent years: As of January 2024, the average 30-year, fixed-rate mortgage was 6.6%.Citation That’s a significant difference from the start of 2020, when the average 30-year rate was about 3.7%. By the following January — nearly a year into the COVID-19 pandemic — rates plummeted to an all-time low of 2.6%.Citation

While prospective buyers are rightfully intimidated by that volatility, there are important pros and cons to buying a house when interest rates are high.

Keep reading to learn the best approach to a high-rate market, mortgage options to consider and tips you can start implementing in your search.


Are Interest Rates Too High to Buy a House?

Your gut reaction to the above question might be a quick and resounding “yes,” but there are also reasons why it might make sense for you to consider a high interest mortgage. Review this side-by-side comparison of pros and cons to help you weigh your options:

Pros Cons
    • High interest rates typically correspond with a buyer’s market, and sellers are more likely to agree to contingencies.
    • Sales prices are fixed and interest rates are temporary; refinancing your loan when rates drop is an option.
    • Tax benefits associated with the Home Mortgage Interest Deduction (HMID)Citation
    • More buyers are deterred by higher interest rates, meaning there tends to be less competition to bid up price wars
    • More opportunities to build equity
  • Greater monthly payment
  • Higher overall cost of home ownership
  • Limited borrowing power
  • Increased probability of getting priced out of a sale






Types of Mortgage Options to Consider

When it comes to mortgages, there are various types available depending on your particular circumstances. The following are different options that may be available to you:

  • Fixed-rate mortgage: Aptly named, fixed-rate mortgage loans keep the same interest rate for the entirety of the loan, as opposed to loans where the interest rate may be adjusted. Because of this, payments are more predictable and are ideal for buyers who intend to be in their home for a long time (they also tend to be the most popular loan option). Fixed-rate mortgages are offered in varying periods: 10-year, 15-year and 30-year. The shorter the loan period, the lower the interest rate but the higher the monthly payments.
  • Adjustable-rate mortgage (ARM): An adjustable-rate mortgage will have a varying interest rate over the lifespan of the loan. There is, however, a certain period at the beginning of the mortgage when monthly payments are consistent. That can last anywhere from a month to several years. Rates are then adjusted at a predetermined frequency. Consider, for example, a 5/1 ARM, which is fixed for five years and then adjusts every year thereafter.
  • First-time home buyers: Being a first-time home buyer can be daunting. But once you familiarize yourself with your options and determine useful steps to achieve your goal of homeownership, your confidence will grow. There are government-sponsored loans and conventional loans and prioritize a low down payment and flexible credit.

Alternative Ways to Finance Your Home Purchase

If for whatever reason a traditional mortgage isn’t a viable option for you, there are other financing options to consider instead, such as:

  • Government-sponsored loans are intended for anyone who might not otherwise qualify for a conventional loan. There are several options:
    • Federal Housing Administration (FHA) loan: Down payments are optional with this type of government-backed loan, appealing to borrowers short on cash and without a perfect credit score — instead falling somewhere between 580 and 739.
    • Veterans Affairs (VA) loan: These loans require no private mortgage insurance and make the qualification process easier. They typically have more favorable interest rates and conditions than other loan types, including conventional loans. Funding is earmarked for American veterans and active service members, as well as spouses/citizens of those who have served in other federal organizations.
    • United States Department of Agriculture (USDA) loan: Low- and moderate-income households are the target beneficiaries of a USDA loan. Homes must be bought in approved communities of less than 20,000 people. No money is required to be put down on USDA loan homes and borrowers can be granted up to 100% of the property value.
  • Temporary rate buydown effectively reduces the interest rate that a borrower pays during the early years of a mortgage loan after a lump sum payment is made into a buydown account. A portion of funds in the account is released every month to contribute to payments. A common method is referred to as a “3-2-1,” representing payments in the first three years calculated at 3%, 2% and then 1%, respectively.Citation
  • Loan assumption is when the current owner transfers their mortgage, including all of its existing terms, to a buyer. That way, a buyer can avoid taking out a new loan. The buyer still needs to qualify for the mortgage. FHA, VA and USDA loans are assumable with approval from the government entity backing the loan. Sellers can charge a premium, however, which could require more money up front from a buyer.
  • Agreeing to a shorter loan term can save you money in the long run but will require larger monthly payments. The shorter the loan term, the less interest you’re paying. The rate itself could even be lower.

8 Tips for Buying a House When Interest Rates Are High

If you’ve determined that buying a house while interest rates are high is a possibility, the following are our top tips for navigating the process with ease:

  1. Get finances in order, as lenders will use your overall debt-to-income ratio to help determine interest rates.
  2. Take advantage of any applicable buyer assistance programs, being sure to research requirements to apply for each.
  3. Consider purchasing a fixer-upper or a home that isn’t quite move-in ready, allowing you to take advantage of a lower purchase price and build sweat equity.
  4. Become a landlord and find tenants once a space is live-in ready, capitalizing on a lower purchase price and benefiting as the property gains value.
  5. Increase the downpayment to reduce the amount of money you need to borrow from a lender and therefore less interest you’re responsible for paying on the loan.
  6. Shop around to find the best rates, potentially saving you thousands of dollars across the life of the loan.
  7. See if it’s possible to buy mortgage points, which are paid directly to the lender at closing in exchange for a lower interest rate.
  8. Buy now, refinance later (however, the caveat to this is that the market is unpredictable, and rates may not drop significantly over time). Refinancing is when homeowners take out a new loan, with a new interest rate, to replace the old one.

Is It Worth Buying a House With High Interest Rates?

Ultimately, it depends. Buying while interest rates are high might be a good idea if:

  • Personal circumstances aren’t conducive to waiting out the market
  • Buyers are financially prepared to put down a substantial amount of money toward the down payment, reducing monthly costs
  • You can negotiate more favorable terms, such as reduced closing costs

However, it may be best to wait for rates to decrease if:

  • Buyers can’t afford a higher monthly payment
  • Moving isn’t absolutely necessary
  • The plan is to only stay in the spot for a short period of time

Whether you’re still wondering if now is the right time for you to purchase a home, or ready to take the leap, our team at Blue Water Mortgage is here to help. Contact us to learn about the many home financing options we offer. We even provide resources on our website to jumpstart your journey and answer many common questions, including a Mortgage FAQs eBook.

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Article Sources

Blue Water Mortgage requires writers to use reliable primary sources, such as white papers, government data, and expert interviews, to produce accurate and unbiased content. We follow strict editorial policies and refer to original research from reputable publishers when necessary.

  1. Forbes Advisor. “Compare Daily Mortgage Rates,”
  2. Rocket Mortgage. “Historical Mortgage Rates: 1971 To The Present,”
  3. Investopedia. “Calculating the Home Mortgage Interest Deduction (HMID),”
  4. Fannie Mae. “Guidelines for Temporary Interest Rate Buydowns,”
Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.