Overcoming high interest rates: Getting your homeownership goals back on track

June 28, 2023

From an adjustable-rate mortgage to a FHA or VA loan, there are options that may help you put your homeownership plan into action.

Whether personal, career or financial — so often goals get put on hold. Sometimes that’s unavoidable, other times it’s a matter of finding an alternative path to success. If your plan to purchase a new home has been stalled due to current market conditions, there are options that may bring your next big move back into sight. No one can say what’s next or predict where rates and the housing market will go. What matters most is to focus on when you’re ready to buy.

Some options to consider to get your homeownership goals back on track are adjustable-rate mortgage (ARM), FHA and VA loans. There’s also the option of buying now with the potential to refinance later when rates drop.

Before you dive in, keep two things in mind:

  • Look beyond interest rates: Contrary to what you might believe, your mortgage interest rate may not be the most important factor. There are plenty of numbers that go into your monthly mortgage amount, like the price of the home and the loan term, and an interest rate is only one piece of the puzzle.
  • Make your mortgage loan officer your ally: Don’t think you have to figure this out on your own. Your mortgage loan officer can be your guide in determining if any of these options are a good fit for you, and help you determine your timeline to achieving your goal.

 

Adjustable-rate mortgage (ARM) loan
 

ARM loans typically feature lower rates and monthly payments than comparable fixed-rate loans during the initial rate period, but rates could increase or decrease once the initial rate expires. While many homebuyers prefer the security of a fixed-rate mortgage, an ARM can be a good choice, too. 

 

Federal Housing Administration (FHA) loan
 

Commonly known as a great option for first-time buyers, an FHA loan could also be right for repeat buyers, too. This option is government-backed and offers more flexible lending requirements than conventional loans. That paves a pathway to success for buyers with a credit score below conventional loan requirements or who have limited cash for a down payment. While the interest rate may be somewhat higher than that of a conventional mortgage and mortgage insurance is required, the affordable down payment as low as 3.5 percent can be a worthwhile trade-off.

 

VA home loan


A VA loan can help active service members, veterans, and eligible surviving spouses reach their homeownership goals. This option is backed by the Department of Veterans Affairs (VA) and requires little or no down payment. Even with no down payment, VA loans do not require mortgage insurance which results in an overall lower monthly payment.

 

Buy now refinance later


This strategy is meant to help buyers who are ready to purchase get into their dream home now, and then potentially refinance in the future when rates drop. It’s important to keep in mind that no one can predict if and when rates will drop or by how much. That means for some buyers, rates may never go low enough for a refinance to save them money.

Buyers can expect to pay somewhere between 2% and 5% of the loan principal in closing costs. Typically, a 1% rate drop is enough to justify refinancing your loan. But it depends on your individual loan scenario. For example, rates will have to drop a lot more on a $100,000 loan than on a $1 million loan to make it worthwhile.

If you’re considering this option discuss it first with your mortgage loan officer. They can help you crunch the numbers and explore the risks versus rewards.

 

Ready to get your homeownership goals back on track?


If you’re ready to buy, don’t let the daily details of the market distract you. Keep in mind that an affordable monthly payment is still possible. We’re here to help! Discussing the above options and other factors with a trusted mortgage loan officer is a great way to firm up your plan and fast track your vision to becoming reality. Find a local mortgage loan officer to discuss your situation over the phone, via email or within a branch.

 

Visit our first-time homebuyer’s guide to learn more about the mortgage process its steps.

Related content

6 questions to ask before buying a new home

8 steps to take before you buy a home

Military homeownership: Your guide to resources, financing and more

What is refinancing a mortgage?

Are professional movers worth the cost?

What to know when buying a home with your significant other

Building a dream home that fits your life

Mortgage basics: How does your credit score impact the homebuying experience?

Mortgage basics: 3 key steps in the homebuying process

Mortgage basics: How much house can you afford?

Mortgage basics: Buying or renting – What’s right for you?

Mortgage basics: Prequalification or pre-approval – What do I need?

How you can take advantage of low mortgage rates

Mortgage basics: Finding the right home loan for you

Home buying myths: Realities of owning a home

Mortgage basics: What is refinancing, and is it right for you?

A checklist for starting a mobility program review

Tips for realtors to help clients get their homeownership goals back on track

How I did it: Turned my side hustle into a full-time job

Common unexpected expenses and three ways to pay for them

It's possible: 7 tips for breaking the spending cycle

Closing on a house checklist for buyers

Multiple accounts can make it easier to follow a monthly budget

Is it time to get a shared bank account with your partner?

Don’t underestimate the importance of balancing your checking account

Which is better: Combining bank accounts before marriage — or after?

At your service: outsourcing loan agency work

How I did it: Bought a home without a 20 percent down payment

5 ways to maximize your garage sale profits 

What you need to know before buying a new or used car

What is a home equity line of credit (HELOC) and what can it be used for?

Housing market trends and relocation impact

An investor’s guide to marketplace lending

What is a CLO?

Beyond Mars, AeroVironment’s earthly expansion fueled by U.S. Bank

ABL mythbusters: The truth about asset-based lending

Collateral options for ABL: What’s eligible, what’s not?

Can ABL options fuel your business — and keep it running?

Maximizing your infrastructure finance project with a full suite trustee and agent

Avoiding the pitfalls of warehouse lending

Evaluating interest rate risk creating risk management strategy

Tech lifecycle refresh: A tale of two philosophies

Changes in credit reporting and what it means for homebuyers

What’s the difference between Fannie Mae and Freddie Mac?

Why other lenders may be reaching out to your employees

High-cost housing and down payment options in relocation

4 benefits of independent loan agents

Middle-market direct lending: Obstacles and opportunities

Crypto + Relo: Mobility industry impacts

For today's relocating home buyers, time and money are everything

Streamline operations with all-in-one small business financial support

How to fund your business without using 401(k) savings

Costs to consider when starting a business

How jumbo loans can help home buyers and your builder business

When to consider switching banks for your business

5 tips to help you land a small business loan

Checklist: 10 questions to ask your home inspector

Checklist: financial recovery after a natural disaster

Student checklist: Preparing for college

The A to Z’s of college loan terms

Co-signing 101: Applying for a loan with co-borrower

Practical money skills and financial tips for college students

How I did it: Paid off student loans

Recognize. React. Report. Caregivers can help protect against financial exploitation

Is online banking safe?

Pros and cons of a personal line credit

3 tips for saving money when moving to a new home

Is raising backyard chickens a good idea financially?

Adulting 101: How to make a budget plan

Personal loans first-timer's guide: 7 questions to ask

You can take these 18 budgeting tips straight to the bank

Save time and money with automatic bill pay

Do you and your fiancé have compatible financial goals?

Personal finance for teens can empower your child

How to save for a wedding

Here’s how to create a budget for yourself

9 simple ways to save

What you need to know about renting

Your financial aid guide: What are your options?

Is a home equity loan for college the right choice for your student

Parent checklist: Preparing for college

How to apply for federal student aid through the FAFSA

What to consider before taking out a student loan

Are you ready to restart your federal student loan payments?

Everything you need to know about consolidating debts

How to use debt to build wealth

What’s a subordination agreement, and why does it matter?

Understanding the true cost of borrowing: What is amortization, and why does it matter?

Know your debt-to-income ratio

Your quick guide to loans and obtaining credit

Checklist: 10 things to look for when touring a home

Dear Money Mentor: What is cash-out refinancing and is it right for you?

Overcoming high interest rates: Getting your homeownership goals back on track

Is it cheaper to build or buy a house

For today's homebuyers, time and money are everything

Crypto + Homebuying: Impacts on the real estate market

Should you buy a house that’s still under construction?

How I did it: Bought my dream home using equity

Buying a home Q&A: What made three homeowners fall in love with their new home

House Hacks: How buying an investment property worked as my first home

Managing the impacts of appraisal gaps in a hot housing market

How I did it: Built living spaces to support my family

Spring cleaning checklist for your home: 5 budget-boosting tasks

Saving for a down payment: Where should I keep my money?

Your guide to breaking the rental cycle

Checklist: 6 to-dos for after a move

What are conforming loan limits and why are they increasing

Uncover the cost: Building a home

The lowdown on 6 myths about buying a home

4 ways to free up your budget (and your life) with a smaller home

Get more home for your money with these tips

Money Moments: Tips for selling your home

Money Moments: How to finance a home addition

How I did it: My house remodel

First-time homebuyer’s guide to getting a mortgage

Dear Money Mentor: When should I refinance a mortgage?

Beyond the mortgage: Other costs for homeowners

10 ways to increase your home’s curb appeal

10 questions to ask when hiring a contractor

5 things to avoid that can devalue your home

What is an escrow account? Do I have one?

Is it the right time to refinance your mortgage?

These small home improvement projects offer big returns on investment

Should you get a home equity loan or a home equity line of credit?

Mortgage basics: What’s the difference between interest rate and annual percentage rate?

Is a home equity line of credit (HELOC) right for you?

How to use your home equity to finance home improvements

How do I prequalify for a mortgage?

Home equity: Small ways to improve the value of your home

Can you take advantage of the dead equity in your home?

4 questions to ask before you buy an investment property

10 uses for a home equity loan

6 essential credit report terms to know

Test your loan savvy

What types of credit scores qualify for a mortgage?

Take the stress out of buying your teen a car

Questions to ask before buying a car

What you should know about buying a car

How to choose the best car loan for you

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Visit usbank.com to learn more about U.S. Bank products and services. Mortgage, home equity and credit products offered by U.S. Bank National Association and subject to credit approval. Deposit products offered by U.S. Bank National Association. Member FDIC.