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Home Equity Loan Rates for September 2022

Home Equity Loan Rates for September 2022

With record-breaking home appreciation seen throughout the pandemic, most homeowners have more equity in their homes now compared to two years ago. If you need access to funds for a renovation project, education expenses or even debt consolidation, tapping into your home's equity could provide you with a lower-rate financing option. A home equity loan, which lets you borrow money against the equity you've built in your home, provides you with a lump sum of cash at a fixed interest rate. 

Home equity loans may be particularly appealing in the current economic climate. Mortgage rates overall have gone up more than 2% since the beginning of the year. Even though rates recently dipped as the Federal Reserve increased its benchmark interest rate for the fourth time this year in an attempt to combat rising inflation, home equity loans still tend to offer lower interest rates than other types of loans. That's a significant benefit for anyone looking for financing at a time when it's uncertain how much rates will fluctuate moving forward. 

This type of financing may make sense if you own a home and have at least 15% to 20% of equity built up in your home. Unlike a home equity line of credit, or HELOC, you'll receive the sum of the loan upfront in one lump payment if you're approved.

A home equity loan is a lower interest rate financing option, but it's not without risk. When you secure a home equity loan, your home acts as collateral, which means you could lose your home if you're unable to repay what you borrowed. It's important to carefully consider whether a home equity loan is right for you before applying for financing.

Here's everything you should know about home equity loans, how they work, who they're best for and how they compare to other loan options.

What is a home equity loan?

A home equity loan offers you a lump sum of cash you borrow against the equity built in your house. Tapping into your home's equity means you are borrowing against the mortgage payments you've already made -- it won't replace your existing mortgage payment -- it's a new loan that you'll repay monthly, along with your existing home loan.

Most lenders require you to have 15% to 20% of equity in your home to secure a home equity loan. To figure out how much equity you have, subtract your remaining mortgage balance from the value of your home. For example, if you have a $500,000 mortgage and you owe $350,000 on it, you have $150,000 in equity. To figure out the percentage, divide this number ($150,000) by your home's value ($500,000) and you'll see you have 30% equity available in your home. Lenders will typically let you borrow around 80% to 85% of your home's equity for a home equity loan. So, in this case, you could borrow up to $120,000 to $127,500. 

A standard repayment period for a home equity loan is between five to 30 years for a home equity loan. You make fixed-rate payments that never change, which means even if interest rates go up, your loan rate is locked in. 

Current home equity loan rate trends

One of the benefits of home equity loans is that they typically have lower interest rates than personal loans or credit cards. Right now, borrowers with good credit and sufficient equity can secure home equity loans with interest rates as low as 3%, according to Bankrate, which is owned by the same parent company as CNET.

One potential downside of a home equity loan is that if your property value goes down for any reason, you could end up underwater on your loan. This happens when the balance of your loan becomes higher than the value of your home. That's what happened to millions of Americans during the 2008 financial crisis. Right now, there's less risk of your home's value decreasing below your home equity loan amount, though. Home prices have appreciated as much as 20% in some metro areas across the US over the last two years, and it seems unlikely that they will go down in a significant way anytime soon.

Pros of a home equity loan 

• Fixed-rate payments: Your monthly payment will never change even if interest rates rise.
• One lump sum of cash: You receive the entire loan upfront in one disbursement.
• Low interest rates: It has a lower interest rate than other types of personal loans or credit cards. 
• Tax deductible interest: If you use it for home renovations, you can deduct the interest from your taxes. 
  

 Cons of a home equity loan 

• Using your home as collateral: If you fail to make your payments or default on your loan, your lender can foreclose and take ownership of your house.
• Can take longer to receive the funds: It can take more time to receive a home equity loan than a personal loan, for example. 
• Closing costs are expensive: Closing costs can range anywhere from 2% to 5% of the loan. 
• Your home's value could decrease after receiving your loan: Although home values are not expected to decrease significantly any time soon, if your home's value were to drop below your home equity loan amount, you would have what is known as negative equity. Negative equity means you owe more than your home is worth. So, if you were to sell your home, you likely would not receive enough money from a seller to pay off your loan balance.

Home equity loans vs. HELOC

Home equity loans and home equity lines of credit, or HELOCs, are similar, but have a few key distinctions. Both let you draw on your home's equity and require you to use your home as collateral to secure your loan. The two major differences between a home equity loan and a HELOC are the way you receive the money and how you pay it back. 

A home equity loan gives you the money all at once as a lump sum, whereas a HELOC lets you take money out in installments over a long period of time, typically ten years. Home equity loans have fixed-rate payments that will never go up, but most HELOCs have variable interest rates that rise and fall with the economy and overall interest-rate trends. 

A home equity loan is better if:

• You want a fixed-rate payment: Your monthly payment will never change even if interest rates rise.
• You want one lump sum of money: You receive the entire loan upfront with a home equity loan.
• You know the exact amount of money you need: If you know the amount you need and don't expect it to change, a home equity loan likely makes more sense than a HELOC.

A HELOC is better if:

• You need money over a long period of time: You can take the money as you need it and only pay interest on the amounts you withdraw, not the full loan amount, as is the case with a home equity loan.
• You want a low introductory interest rate: Although HELOC rates may increase over time, they also typically offer lower introductory interest rates than home equity loans. So, you could save money on interest charges.

Home equity loans vs. cash-out refinances

A cash-out refinance is when you replace your existing mortgage with a new mortgage, typically to secure a lower interest rate and more favorable terms. Unlike a traditional refinance, though, you take out a new mortgage for the home's entire value -- not just the amount you owe on your mortgage. You then receive the equity you've already paid off in your home as a cash payout. 

For example, if your home is worth $450,000 and you owe $250,000 on your loan, you would refinance for the entire $450,000, rather than the amount you owe on your mortgage. Your new cash-out refinance home loan would replace your existing mortgage, and then offer you a portion of the equity you built (in this case $200,000) as a cash payout. 

Both a cash-out refi and a home equity loan will provide you with a lump sum of cash that you'll repay in fixed amounts over a specific time period, but they have some important differences. A cash-out refinance replaces your current mortgage payment. When you receive a lump sum of cash from a cash-out refi, it is added back onto the balance of your new mortgage, usually causing your monthly payment to increase. A home equity loan is different -- it does not replace your existing mortgage and instead adds an additional monthly payment to your expenses. 

A home equity loan is better if:

• You do not want to pay private mortgage insurance: Some cash-out refinances require PMI, which can add hundreds of dollars to your payments, but home equity loans do not.
• You can't complete a refinance: With rates rising, it's possible that your mortgage rate is lower than current refinance rates. If that's the case, it likely won't make financial sense for you to refinance. Instead, you can use a home equity loan to only take out the money you need, rather than replacing your entire mortgage with a higher interest rate loan.  

A cash-out refinance is better if:

• Refinance rates are lower than your current mortgage rate: If you can secure a lower interest rate by refinancing, this could save you money in interest, while providing access to a lump sum of cash. 
• You only want one monthly payment: The amount you borrow gets added back to the balance of your mortgage so you only make one payment to your lender every month.
• Less stringent eligibility requirements: If you don't have great credit or you have a high debt-to-income ratio, you may have an easier time qualifying for a cash-out refi compared to a home equity loan. 
• Lower interest rates: Cash-out refinances sometimes offer more favorable interest rates than home equity loans.

FAQs

What is a good home equity loan rate?

Right now, lenders are offering rates that start as low as around 3% for borrowers with good credit, but rates vary depending on your personal financial situation. A lender will base your interest rate on how much equity you have in your home, your credit score, income level and other aspects of your financial life such as your debt-to-income ratio, which is calculated by dividing your monthly debts by your gross monthly income. 

How do I qualify for a home equity loan?

You are typically required to have at least 15% to 20% equity built up in your home to qualify for a home equity loan. You must also have enough income and a low-enough debt-to-income ratio to qualify -- lenders usually want to see a DTI of 43% or below. Lenders also like to see a minimum credit score of at least 620. Generally speaking, if your credit score is below 700 there is a possibility that a lender will deny you for a home equity loan. The better your credit, the better your chances of being approved for a loan with a low interest rate. 

What can I use a home equity loan for?

Home equity loans can be used for anything you choose to spend the money on. Typical life expenses that people usually take out home equity loans to cover are expenditures like home renovations, higher education costs like tuition or to pay off high-interest debt like credit card debt. There's a bonus for home improvements: If you use a home equity loan for renovations, the interest is tax deductible.

You can also use a home equity loan in an emergency situation or for life events like weddings. But keep in mind that whatever you chose to use a loan for, taking out a large sum of money that accrues interest is an expensive choice you should always carefully consider – especially since you're using your home as collateral to secure the loan. If you can't pay it back, the lender could seize your home to repay your debt.

How do I apply for a home equity loan?

Applying for a home equity loan is similar to applying for a mortgage. You need to qualify with a lender or bank who is willing to lend you the money. First, the lender will first want to make sure you have at least 15% to 20% equity in your home. If you do, the lender will take into account your credit score (lenders usually like to see a minimum score of 620), your income and your current debt-to-income ratio to determine whether you qualify and what your interest rate will be. You should be prepared to have financial documents like pay stubs and W2s in order, as well as proof of ownership and proof of the appraised value of your home. It's important to interview multiple lenders to determine which lender can offer you the lowest rates and fees.

More mortgage tools and resources

You can use CNET's mortgage calculator to help you determine how much house you can afford. The CNET mortgage calculator factors in variables such as the size of your down payment, home price and interest rate to help you understand how much of a difference even a slight increase in rates can make in the amount of interest you'll pay over the lifetime of your loan.

More mortgage rates:

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APR vs. interest rate: What are the differences?

APR vs. interest rate: What are the differences?

When shopping for a mortgage, car loan or new credit card, you may be presented with an interest rate and an annual percentage rate -- each of which will show you the cost of the loan in a different way. Like with so many seemingly mundane financial details, the real-world implications of these two rates can add up to hundreds or thousands of dollars over time.

Knowing the crucial differences between the interest rate and APR will help you calculate your monthly payment, understand the total cost of a loan and, ultimately, identify the best deal. Here's why understanding how an APR impacts your loan -- especially in the context of a mortgage that can run into the hundreds of thousands of dollars -- is so important.

How interest rates work

An interest rate is the percentage of a loan you'll pay to the lender in exchange for borrowing money. With a mortgage, when you begin making monthly payments, interest is included in your payment. The actual rate you'll pay for a loan depends on a few factors.

Market trends

Interest rates are set by the Federal Open Market Committee (often referred to as "The Fed"), which is made up of representatives from the Federal Reserve. The Fed meets several times per year to discuss the state of the economy and adjust interest rates as needed. The Committee's job is to maintain healthy economic growth while keeping inflation at bay.

Currently, interest rates are at historic lows -- due in part to the coronavirus pandemic, but continuing a trend originating during the 2008 financial crisis. At the end of April 2021, the Fed decided to keep rates close to zero to keep financing as affordable as possible for businesses and individuals during this tough economic time.

Credit score

Your credit score also impacts the interest rate you're offered. Advertised interest rates are usually reserved for borrowers with excellent credit -- traditionally defined as a score of 760 or higher -- and may also include a rate discount for setting up automatic loan payments.

Individuals with a lower credit score (under 760) are usually offered higher interest rates to mitigate the lender's risk of losing money if the borrower defaults on their loan. A low credit score, a history of late payments or collection accounts can impact whether you're approved for a loan. And if you are approved, you'll likely be charged a higher interest rate than a borrower with good-to-excellent credit. 

Most lenders recommend cleaning up your credit and finances before applying for a loan. Improving your credit score by paying down your debts and creating a history of on-time payments could save you thousands of dollars in interest on a mortgage.

For example, look at how a 0.5% difference in interest rates can change the total cost of a $300,000 loan over 30 years. 

• Interest paid at 3.00%: $155,332.36
• Interest paid at 3.50%: $184,968.26

Though the numbers may be smaller for a credit card or car loan, modest differences in interest rates can add up over the years. 

Other costs

In addition to your interest rate, there are other costs included in your home loan. The interest rate may be the most significant factor, but annual fees, closing costs and additional charges may add to the cost of borrowing money. 

How annual percentage rate works

The annual percentage rate is typically higher than an interest rate because it includes all the costs of borrowing money. Some fees that may be incorporated into the APR are:

• Points (one point is equal to 1% of the loan)
• Loan-processing and administrative fees
• Underwriting fee
• Escrow or loan settlement fee
• Private mortgage insurance (for mortgages)
• Document-preparation fee
• Annual fee (for credit cards)

While you may not always be able to negotiate your interest rate, you may be able to negotiate some of the fees included in your APR. The fewer the charges associated with the loan, the lower the APR.

Lenders must legally display their APR

The Truth in Lending Act was enacted in 1968 to make credit cards and loans more transparent, so buyers know what they're comparing -- and signing up for. One of the Act's requirements is that lenders must report APR, which reflects the extra costs of borrowing more accurately. You'll find the APR advertised alongside the interest rate. You can also find it in the Loan Estimate. The interest rate is usually shown on page one under "Loan Terms," and the APR usually appears on page three under the "Comparisons" section.

Fixed vs. variable APR

A fixed APR does not change. But a variable rate APR can fluctuate based on index rate changes, such as the Wall Street Journal's published prime rate. Some variable APRs -- penalty APRs -- can also change as a penalty if you make late payments. 

How loan terms impact APR

The loan terms you choose will also impact the amount of interest and other fees you'll pay over the lifetime of your mortgage. You'll typically be able to make lower monthly payments and pay less monthly interest and fees with a 30-year mortgage than with a 15-year home loan. But, since you'll be making this payment for twice the amount of time, you'll ultimately pay more in interest. Generally, you'll pay less interest and fees overall with a shorter mortgage term.

Here's an example of how a loan term can impact your APR, based on a $250,000 home loan.

How loan term impacts APR

	Option A: 3.25% interest rate, 15 years	Option B: 3.25% interest rate, 30 years	Option C: 3.75% interest rate, 15 years	Option D: 3.75% interest rate, 30 years
Cost of points and fees	$2,500	$2,500	$1,200	$1,200
APR	3.43%	3.35%	3.84%	3.80%
Monthly payment	$1,405.34	$870.41	$1,454.44	$926.23
Total interest paid	$52,960.76	$113,348.55	$61,800.08	$133,443.23

In this example, Option B has the lowest APR -- 3.350% for a 30-year loan term -- and may seem like the best choice at first glance. The monthly payment is the smallest at $870.41, over $500 cheaper per month than Option A. However, because Option B is spread out across 30 years, you'll pay more than double the amount of interest than you would with Option A. 

Interest rate vs. APR: Which one should you use when mortgage shopping?

Bottom line: Interest rates are only part of the picture. When you're shopping for a mortgage or any other type of loan, comparing APR rates across lenders will give you the most accurate and complete view of your costs. A lender could advertise the lowest interest rate yet charge a higher APR, costing you more money in interest in the long term. 

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VA Refinance Rates for August 2022

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VA Refinance Rates for August 2022

If you or your spouse are a veteran, you may be able to lock in a lower mortgage rate by refinancing with a VA refinance loan. Refinancing your mortgage through a VA refinance loan could reduce your interest rate, make monthly payments more affordable or shorten your loan term so you can pay off your mortgage faster. 

Just like VA loans, VA refinance loans are backed by the US Department of Veterans Affairs, which makes them especially secure loans in the eyes of private lenders that issue them. If you are eligible for a VA refinance, you can take advantage of lower interest rates — especially if you're refinancing from a conventional loan. Conventional loans and refinances tend to have higher interest rates and more fees than VA options, which is why VA refinancing can be particularly appealing. 

Here's everything you need to know about VA refinance loans, who is eligible and what current rates are.

Current VA refinance rate trends

Right now, VA refinance interest rates are hovering between 4.5%-5%, compared to the 30-year fixed-rate for conventional refinances which has dropped into the low-to-mid 5% range. Until the Federal Reserve increased its benchmark interest rate for the fourth time at the end of July, mortgage rates overall had been rising since the beginning of the year, but reversed course and dropped in response to the Fed's action.  

Some volatility in mortgage rates is anticipated as concerns grow over the potential slowing of the economy, but regardless of the economic climate, securing yourself the lowest refinance rate possible will help you save tens of thousands of dollars over the lifetime of your loan.

What are VA refinance loans and who should consider one?

To qualify for any type of VA loan, refinance loans included, you must be either an active or retired member of the military, or the spouse of one.

Refinancing (whether through a VA or conventional refinance) allows you to replace your existing home loan with one that typically has a lower interest rate and a new loan term that will offer valuable savings over the long run.

There are many different reasons to consider refinancing. If you want to shorten your loan term and pay off your mortgage faster, you can refinance from a 30-year mortgage into a 15-year mortgage. Doing this will decrease the amount of interest you pay over the lifetime of the loan, but it will increase your monthly mortgage payment.

If your current mortgage rate is high, you also might be able to lock in a lower rate, which could decrease your monthly payment. Doing this could free up cash flow available for other expenses like car payments, high-interest debt, home improvements or education expenses. 

Pros of a VA refi

• Lower interest rate: You will pay a much lower interest rate compared to a traditional 30-year or 15-year refi, potentially saving you tens of thousands of dollars over the course of your new home loan. 
• No down payment required: There is no down payment needed to complete a VA refinance.
• No private mortgage insurance requirement: If you refinance a conventional loan with less than 20% equity in your home, you typically need to purchase private mortgage insurance, but no mortgage insurance is necessary for VA refinancing.
• Less stringent credit requirements: Like regular VA loans, VA refinance loans tend to allow for lower credit scores and incomes than conventional refis. 

Cons of a VA refi loan

• VA funding fee: Although it's a one-time expense, this upfront fee can add thousands onto the total cost of your refinance. However, it can be rolled into the refinance amount rather than paid upfront. 
• Occupancy restrictions: You must live in (or at some point have lived in) the house you are refinancing.
• Service requirements: You must be an active or retired military member, or the spouse of one. 
• Fewer options: If your current home loan is not already a VA loan, you can refinance, but only as a cash-out refinance (which we'll explain down below).

Current mortgage and refinance rates

We use information collected by Bankrate, which is owned by the same parent company as CNET, to track daily mortgage rate trends. The above table summarizes the average rates offered by lenders across the country.

FAQs

What types of VA refinance loans are available?

There are two main types of VA refinance loans available. If you already have a VA mortgage, you can refinance with an Interest Rate Reduction Refinance Loan (IRRRL), or what is commonly known as a "streamline" refinance, which can give you a lower interest rate on your new mortgage. However, if you have a conventional mortgage or other type of home loan you cannot refinance with a VA IRRRL. Just as with all refinances, this type of refinance replaces your current mortgage with a new one. To qualify for a VA IRRRL refinance, you must be able to prove that you currently live or have at one point lived in that home.

If you want to refinance a different type of mortgage into a VA refinance, your only option is to refinance with a cash-out refinance loan, which is a bit more involved. A cash-out refi allows you to take a lump sum of cash from the equity you've built up in your home and it works a little differently than a standard rate and term refinance (which is essentially what the VA's IRRRL option is).

When you complete a cash-out refi, you're still replacing your old mortgage with a new one, but you end up with a bigger loan than you had before. That's because you receive the equity you've built in your home back as cash -- and this amount is added on to the loan. As a result, cash-out refis may come with higher fees and rates. You'll also pay more interest over the long run, but the trade-off is the immediate access to cash you can use to pay off other debt or life expenses. 

To complete a VA cash-out refi, you must currently live in the home, qualify for a VA-backed home loan Certificate of Eligibility, and meet both the VA's and your lender's requirements for income, credit score and other requirements.

Do VA mortgage refinances have fees?

VA mortgage refinances do have an upfront funding fee, but it's minimal compared to the fees you typically pay for a conventional refi. You can also roll this fee into the refinance loan amount and pay it off over time. For an IRRRL, you are required to pay a fee equivalent to 0.5% of your loan. For a cash-out refinance, you must pay a fee worth 2.3% of your loan's value for first-use and a 3.6% fee after first use. 

You will still have to pay lender-specific fees such as closing costs, which can add up to thousands of dollars that you will pay no matter what type of mortgage you are refinancing. 

What's the difference between a VA refinance loan and a conventional one?

The biggest differences between a VA refinance and a conventional refinance are the criteria, the interest rate you will pay, the fees you will be required to pay and the credit and income requirements lenders will expect to see from you as a borrower. VA refinance loans are only available to current or former military members and their spouses, and they have lower interest rates, fees and income requirements.

More mortgage tools and resources 

You can use CNET's mortgage calculator to help you determine how much house you can afford. The CNET mortgage calculator factors in variables like the size of your down payment, home price and interest rate to help you figure out how large of mortgage you may be able to afford. Using the CNET mortgage calculator can also help you understand how much of a difference even a slight increase in rates makes in how much interest you'll pay over the lifetime of your loan.

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Today's Mortgage Rates for Aug. 22, 2022: Rates Move Up

Today's Mortgage Rates for Aug. 22, 2022: Rates Move Up

A few notable mortgage rates moved up today. The average interest rates for both 15-year fixed and 30-year fixed mortgages both saw increases. At the same time, average rates for 5/1 adjustable-rate mortgages also increased.

Though mortgage rates have been rather consistently going up since the start of this year, what happens next depends on whether inflation continues to climb or begins to retreat. Interest rates are dynamic and unpredictable -- at least on a daily or weekly basis -- and they respond to a wide variety of economic factors. Right now, they're particularly sensitive to inflation and the prospect of a US recession. With so much uncertainty in the market, if you're looking to buy a home, trying to time the market may not play to your favor. If inflation rises and rates climb, this could translate to higher interest rates and steeper monthly mortgage payments. For this reason, you may have better luck locking in a lower mortgage interest rate sooner rather than later. No matter when you decide to shop for a home, it's always a good idea to seek out multiple lenders to compare rates and fees to find the best mortgage for your specific situation.

30-year fixed-rate mortgages

The average interest rate for a standard 30-year fixed mortgage is 5.78%, which is an increase of 25 basis points from one week ago. (A basis point is equivalent to 0.01%.) The most frequently used loan term is a 30-year fixed mortgage. A 30-year fixed rate mortgage will usually have a smaller monthly payment than a 15-year one -- but usually a higher interest rate. You won't be able to pay off your house as quickly and you'll pay more interest over time, but a 30-year fixed mortgage is a good option if you're looking to minimize your monthly payment.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 4.95%, which is an increase of 4 basis points from seven days ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a higher monthly payment. But a 15-year loan will usually be the better deal, if you can afford the monthly payments. You'll usually get a lower interest rate, and you'll pay less interest in total because you're paying off your mortgage much quicker.

5/1 adjustable-rate mortgages

A 5/1 adjustable-rate mortgage has an average rate of 4.30%, a climb of 8 basis points compared to last week. With an ARM mortgage, you'll typically get a lower interest rate than a 30-year fixed mortgage for the first five years. But since the rate adjusts with the market rate, you may end up paying more after that time, as described in the terms of your loan. Because of this, an ARM could be a good option if you plan to sell or refinance your house before the rate changes. But if that's not the case, you could be on the hook for a significantly higher interest rate if the market rates change.

Mortgage rate trends

Though mortgage rates were historically low at the beginning of 2022, they have been rising somewhat steadily since then. The Federal Reserve recently raised interest rates by another 0.75 percentage points in an attempt to curb record-high inflation. The Fed has raised rates a total of four times this year, but inflation still remains high. As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.

Though the Fed does not directly set mortgage rates, the central bank's policy actions influence how much you pay to finance your home loan. If you're looking to buy a house in 2022, keep in mind that the Fed has signaled it will continue to raise rates, and mortgage rates could increase as the year goes on. Whether rates follow their upward projection or begin to level out hinges on if inflation actually slows.

We use information collected by Bankrate, which is owned by the same parent company as CNET, to track rate changes over time. This table summarizes the average rates offered by lenders nationwide:

Average mortgage interest rates

Product	Rate	Last week	Change
30-year fixed	5.78%	5.53%	+0.25
15-year fixed	4.95%	4.91%	+0.04
30-year jumbo mortgage rate	5.80%	5.52%	+0.28
30-year mortgage refinance rate	5.76%	5.51%	+0.25

Rates as of Aug. 22, 2022.

How to shop for the best mortgage rate

When you are ready to apply for a loan, you can reach out to a local mortgage broker or search online. When looking into home mortgage rates, think about your goals and current finances. A range of factors -- including your down payment, credit score, loan-to-value ratio and debt-to-income ratio -- will all affect your mortgage interest rate. Having a good credit score, a higher down payment, a low DTI, a low LTV, or any combination of those factors can help you get a lower interest rate. The interest rate isn't the only factor that affects the cost of your home — be sure to also consider other costs such as fees, closing costs, taxes and discount points. Be sure to shop around with multiple lenders -- including credit unions and online lenders in addition to local and national banks -- in order to get a mortgage that's the right fit for you.

How does the loan term impact my mortgage?

When picking a mortgage, remember to consider the loan term, or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Another important distinction is between fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are fixed for the duration of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only fixed for a certain amount of time (commonly five, seven or 10 years). After that, the rate fluctuates annually based on the market interest rate.

One factor to consider when choosing between a fixed-rate and adjustable-rate mortgage is how long you plan on staying in your home. Fixed-rate mortgages might be a better fit for those who plan on living in a home for a while. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages might offer lower interest rates upfront. If you don't plan to keep your new home for more than three to 10 years, though, an adjustable-rate mortgage might give you a better deal. The best loan term all depends on your situation and goals, so make sure to think about what's important to you when choosing a mortgage.

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20-Year Interest Rates for September 2022

20-Year Interest Rates for September 2022

Although a 20-year fixed-rate mortgage is a less common choice for a home loan than a 15- or 30-year mortgage, it has some advantages to consider when buying a house. A 20-year mortgage is a home loan you take out that you repay over a 20-year period. It also has a fixed interest rate just like 15- and 30-year mortgages do. 

In a rising interest rate environment, a 20-year mortgage has some benefits over a 30-year mortgage. Since it's a shorter loan term you will end up paying a full decade less in interest, which adds up to tens of thousands of dollars in savings.

Here's everything you need to know about what a 20-year mortgage is, how they work and how to find the lowest mortgage rates possible. 

What is a 20-year mortgage?

A 20-year mortgage works the same way as 15- and 30-year mortgages, it just has a 20-year term instead. You'll still need to meet all the same criteria and qualify with a lender or bank to be approved for this home loan type.

Comparing a 20-year and 30-year fixed rate mortgage

How does a 20-year home loan stack up to a 30-year mortgage? A 20-year term has the benefit of simply being paid off in a shorter amount of time. You'll have a higher monthly payment for two decades, but save yourself 10 years of interest on your loan. 

Comparing a 20-year and 15-year fixed rate mortgage

While similar to a 15-year mortgage, with a 20-year mortgage, you'll have lower monthly payments, but pay five additional years in interest. What length mortgage you choose will depend in part on how high of a payment you can afford. A 20-year mortgage may be a good compromise if you can't afford the monthly payment for a 15-year mortgage, but don't want to stretch your loan terms out to 30 years.

No matter what term length you choose for a mortgage, it's important to do your research and interview numerous lenders before committing to one. This will help you find the lowest rate and fees available for your personal financial situation. The more lenders you talk to, the greater your chances of finding a lower rate. Even half a percentage point can make a big difference in the amount of interest you pay over the life of your mortgage. 

20-year fixed mortgage trends

Right now, 20-year fixed-rate mortgage rates are hovering in the mid to upper 5% range, according to Bankrate, which is owned by the same parent company as CNET. Mortgage rates were at their highest levels in 14 years earlier this year, and have been consistently climbing since January when rates were still historically low and closer to 3%. 

Depending on what happens with inflation, mortgage rates may remain relatively flat or they could keep increasing. The Federal Reserve is likely to continue raising rates over the course of the year, as economic conditions like inflation continuing to put additional pressure on rates. If you're considering buying a home, it's likely that mortgage rates are currently lower than they will be by the end of 2022. This means it could make sense to buy a home now, rather than waiting. 

You can use CNET's mortgage calculator to figure out how much a difference in interest rates will cost you for your mortgage. 

Current mortgage and refinance rates

We use information collected by Bankrate to track daily mortgage rate trends. The above table summarizes the average rates offered by lenders across the country.

Pros of a 20-year fixed-rate mortgage

Here are some key benefits a 20-year home loan offers over standard 30-year fixed-rate mortgages:

• Save money on interest: You will save thousands of dollars in interest over the life of your loan compared to a 30-year mortgage. 
• Pay off loan faster: You will pay off your mortgage 10 years earlier than the most common type of mortgage, which is a 30-year fixed-rate mortgage, as well as building up equity in your home faster. 

Cons of a 20-year fixed-rate mortgage

And here are some reasons why a 20-year mortgage may not make as much sense as a 30-year home loan.

• Higher monthly payments: You have to be able to afford the monthly payments on a 20-year mortgage, which will be higher than a 30-year mortgage and may eat into your monthly budget. 

How do you qualify for a 20-year fixed-rate mortgage?

You apply for a 20-year mortgage the same way you do for other types of mortgages. You must qualify with a lender or bank who is willing to lend you the money. The lender will take into account almost every aspect of your financial life to determine whether or not you can pay back the loan -- you'll submit financial documents like tax returns and pay stubs to apply for a home loan. 

Information like your credit score, your income, how much debt you're carrying and your loan-to-value ratio all affect the rate a lender will offer you.

Other mortgage tools and resources

You can use CNET's mortgage calculator to help you determine how much house you can afford. CNET's mortgage calculator takes into account things like your monthly income, expenses and debt payments to give you an idea of what you can manage financially. Your mortgage rate will depend in part on those income factors, as well as your credit score and the ZIP code where you're looking to buy a house.

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What Is Home Equity?

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What Is Home Equity?

Most homeowners now have more equity in their homes than they did two years ago, thanks to surging home values during the pandemic. That means right now is a good time to consider tapping into your home equity if you're looking to borrow money at a lower interest rate than you might get with other types of loans such as personal loans. Home equity is the difference between what you owe on your mortgage and the current market value of your home.

You build equity in your home by consistently making mortgage payments over the years. Equity is valuable because it allows you to borrow money against your home at lower interest rates than other types of financing. Once you have enough equity built up in your home, lenders and banks will allow you to borrow against it. Some of the most common reasons to borrow against your equity are to pay for life expenses such as home improvements, higher education costs such as tuition, or to pay off high-interest credit card debt.

Most lenders want to see that you've built up at least 15% to 20% in equity in order to let you borrow money against your house in the form of refinancing or other kinds of home equity loans. One of the simplest ways to ensure you have a good chunk of equity in your home is to make a large down payment if you are able to. 

For a typical homeowner with a 30-year fixed-rate mortgage, building up 15% to 20% usually takes about 5 to 10 years. Even if you paid less for your home when you bought it years ago, your equity is based on the present-day value of your house. If, for example, your home is currently worth $500,000 and you have $400,000 left to pay on your mortgage, you would have $100,000 of equity in your home.

Here's what you need to know about home equity, what it is, how to calculate it and why it's important to homeowners. 

How do you calculate home equity?

To calculate your home equity, simply subtract your remaining mortgage balance from the current market value of your home. So if you owe $400,000 on your mortgage and your house is worth $500,000, you have $100,000, or 20% equity in your home. You may need to work with an appraiser or real estate agent in order to get an accurate evaluation of your home's fair market value, especially since home values have risen by record-breaking amounts since the beginning of the pandemic. 

Ways to borrow against home equity 

There are various ways to access the equity in your home. Some of the most common equity financing options are home equity loans, home equity lines of credit (or HELOCs) and reverse mortgages. It's important, however, to keep in mind that all of these options require you to put up your home as collateral to secure the loan, so it's critical to understand that there's a risk of losing your home to foreclosure if you miss payments or default on your loan for any reason. 

Home equity loan

A home equity loan lets you borrow money against the equity you've built in your home and provides you with a lump sum of cash at a fixed interest rate. Lenders typically want to see that you have at least 15% to 20% in your home to approve you for a home equity loan. A home equity loan doesn't replace your mortgage like a refinance, rather, it's an entirely new loan that you'll repay monthly along with your existing mortgage payment. But just like a mortgage, with a home equity loan, your interest rate never changes and your monthly payments are fixed, too.

HELOCs

A home equity line of credit, or HELOC, is a type of loan that lets you borrow against the equity you've built up in your home and functions like a credit card. It provides you with an open line of credit that you can access for a certain amount of time, typically 10 years, followed by a set repayment period, which is usually 20 years. Lenders also generally want you to have at least 15% to 20% in your home for HELOC approval. With a HELOC, you don't have to take all of your funds out at once, and you can withdraw money repeatedly from your HELOC over the 10-year period, once previously borrowed sums are paid back.

"A HELOC offers more flexibility than a home equity loan -- you can't withdraw money from a home equity loan like you can with a HELOC, and a HELOC allows you to receive replenished funds as you pay your outstanding balance," said Robert Heck, VP of Mortgage at Morty, an online mortgage marketplace.

HELOCs have variable interest rates however, so it's important to make sure you can afford higher monthly payments if your rate goes up once your introductory interest rate expires, especially in the current economic climate. 

Reverse mortgage  

You must be 62 years or older to access a reverse mortgage and have either paid off your home or have significant equity accumulated, usually at least 50%. With a reverse mortgage, you do not have to make monthly mortgage payments and the bank or lender actually makes payments to you. You must still pay your property taxes and homeowners insurance and continue to live in the house, however. A reverse mortgage allows you to access the equity in your home and not pay back the funds for an extended period of time while using them for other expenses during retirement. It's important to keep in mind that you are building a mortgage balance back up as you borrow against your equity, and your estate will eventually have to pay off your loan. A common way to repay this loan is to sell your house. 

The bottom line

Unlocking the equity in your home can be a valuable way to access financing to cover other life expenses. It's important to understand the differences between the kinds of equity loans available to secure the best one for your particular financial situation. When comparing ways to access equity, always take into account the interest rate, additional lender costs and fees, and the size of the loan and how it will be disbursed to you, as well as the amount of time you have to pay it back, before you enter into an agreement to borrow against the equity in your home. 

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Rocket Mortgage Review for September 2022

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Rocket Mortgage Review for September 2022

Rocket Mortgage is the largest online retail mortgage lender in the US. This online lender offers a wealth of educational content on its website to help buyers better understand the mortgage and home-buying processes. 

Its website has multiple, easy-to-use mortgage calculators to help you determine how much house you can afford. Rocket Mortgage is one of the top lenders of FHA loans, which are lower, flexible down payment options for first-time home buyers. It is also one of the largest securitizers of VA loans, which are lower-cost mortgages for veterans and their family members. 

Rocket Mortgage offers an option called Overnight Underwrite, a fast, verified approval tool for securing a home loan. It functions similarly to a preapproval letter but it actually offers full approval from the lender in as little as 2 hours. By uploading all of your paperwork by 7 p.m. ET, for example, you can have full approval by the next morning. If you go through the verified approval process and your loan does not close because of Rocket Mortgage's review of your finances, it will pay you $1,000.

Here's everything you need to know about Rocket Mortgage and its mortgage offerings. 

What types of mortgages does Rocket Mortgage offer?

Rocket Mortgage offers most types of home loans and is one of the largest online mortgage lenders in the country. Its full list includes:

• VA , or Veterans Affairs loans
• FHA , or Federal Housing Administration loans
• Conventional 
• Jumbo
• ARMs , or adjustable-rate mortgage loans
• Refinance

Minimum credit score for Rocket Mortgage

The minimum credit score for conventional mortgages with Rocket is 620, and 680 for jumbo loans. You can get approved for an FHA or VA loan through Rocket Mortgage with a score as low as 580. 

Minimum down payment requirements for Rocket Mortgage 

The down payment requirements with Rocket Mortgage are the same standard requirements for all home loans. Here are the requirements by loan type:

• VA loan: 0% minimum down payment required
• FHA loan: 3.5% minimum down payment required
• Conventional loan:3% minimum down payment required
• Jumbo loan: 10% minimum down payment required

What are Rocket Mortgage's terms, fees and conditions?

Rocket Mortgage charges most of the typical fees that all lenders do, but there is no fee to lock in an interest rate for 45 days. Locking in your rate can be helpful, particularly since interest rates are rising and are expected to keep going up throughout 2022. Even one-tenth of a percentage point can add tens of thousands of dollars over the life of your loan. 

However, if you want to extend your rate for an additional 15 days (which you can do twice) it will cost you 25 basis points, which means your mortgage rate will go up by 0.25%. While some lenders offer a free float down, which lets you lower your locked interest rate if rates go down, Rocket Mortgage does not offer this as a standard feature. Instead, Rocket Mortgage offers Rate Shield, a product that allows you to lock in an interest rate for 90 days before you find a home, which does include one free float down -- but it will cost you 1 basis point. 

This online mortgage giant also charges a deposit of $500 for home appraisals, which is used to pay for the appraisal when you're closing on your new home at the end of the transaction.

Outside of specific lender fees, there are other standard costs and fees associated with buying a home. Some of the most common ones include:

• Home appraisal 
• Title insurance
• Lawyer fees
• Taxes
• Homeowner's insurance

What discounts does Rocket Mortgage offer?

Just as most lenders do, Rocket Mortgages offers you the ability to buy down your interest rate by purchasing mortgage points up front. If you can afford to pay cash for points, your interest rate for your entire loan will go down, saving you tens of thousands of dollars over the lifetime of your mortgage. 

Can you refinance with Rocket Mortgage?

Yes, Rocket Mortgage offers refinance home loans. You can complete a cash-out refinance or a standard term rate finance. 

Where does Rocket Mortgage operate?

Rocket Mortgage operates online in all 50 states in the US. Although the company itself does not employ any mortgage brokers, it works with thousands of independent mortgage brokers across the country, many with physical branches you can go to for an in-person experience.

FAQs

How long does it take to apply online with Rocket Mortgage?

Rocket Mortgage has a verified approval process called Overnight Underwrite, which can approve you for a mortgage in as little as 2 hours. 

Does Rocket Mortgage advertise interest rates online?

Rocket Mortgage does advertise daily interest rates online, but your individual interest rate is always specific to your personal financial situation. Your credit score is a huge factor in determining your interest rate, so make sure to prioritize paying off any high-interest debt like credit card debt before you start house hunting. 

There is no hard credit pull when you are looking for general rates from Rocket Mortgage or getting prequalified, but to be preapproved or verified does require a hard pull on your credit.

How many days does it take to close on a home with Rocket Mortgage?

It can take as little as eight days to close on a new house with Rocket Mortgage, which is a pretty fast closing process. On average, the closing process takes about 26 days, but this depends on the market where you're buying your new house. In especially hot markets, you should expect closing on your house to take longer than a month, regardless of the mortgage lender you work with.

Methodology

CNET reviews mortgage lenders by comparing a variety of criteria including: loan types offered, credit score requirements, down payment requirements, features, terms and fees, discounts offered, accessibility and refinance options.

More mortgage advice

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.

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Should You Buy a Home in 2022? Here's What You Need to Know

Should You Buy a Home in 2022? Here's What You Need to Know

This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.

After two years of a wildly hot and competitive housing market with skyrocketing home prices, there are some signs indicating that these record-high spikes might start leveling off. This past April, home price increases declined for the first time in four months, as did sales of new homes. 

But many experts note that, given the ongoing shortage of properties, home prices will still continue to go up in 2022 -- just at a slower pace. Plus, prospective new homeowners have to contend with relatively high mortgage rates, which keep monthly mortgage payments expensive. Although mortgage rates have dropped slightly since the Federal Reserve announced its fourth rate hike of the year to continue combating inflation, they're still more than 2% higher than they were at the beginning of 2022. So homebuyers should expect their mortgage payments to be higher this year, even if lessening demand decreases competition for homes.

"If we've seen the peak in inflation then we have seen the peak in mortgage rates," said Greg McBride, chief financial analyst at CNET's sister site, Bankrate. "The outlook for a weaker economy will hold sway as long as inflation pressures begin to show evidence of easing. If we get a couple months down the road and that hasn't happened, then all bets are off."

Even though mortgage rates appear to be leveling off, when taking all of these factors into account, a homebuyer will now pay almost 47% more for the same property compared with a year ago, according to Realtor.com. 

Buying a home is one of the most important money moves you'll ever make. It's an exceptionally personal decision that requires evaluating your long-term goals while making sure you're financially ready, from the down payment to interest on a home loan. Your job stability, household needs and the inventory available where you want to live all play a role in determining what makes sense for you. 

Here are the most important things to consider when buying a house in 2022, including why it might make sense to wait or to rent instead of buy. 

Key factors to consider when buying a home in 2022

Right now, home prices are still seeing double-digit growth nationwide and all-cash offers still make up around a quarter of housing bids, according to Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors. Does that mean you should try to hold off until prices start going down? Not necessarily.

The first thing to keep in mind is that expert predictions are imperfect. No one knows what's going to happen with the economy, even with warning signs for events like recessions. And timing the market, or trying to make decisions based on what you think will happen to prices or rates in the future, is generally not a sound strategy. "With housing, buyers tend to obsess over home values and how buying at a certain time may be better for appreciation and equity," said Farnoosh Torabi, personal finance expert and editor-at-large at CNET. "That's important, but your monthly housing payment is what really matters in the end."

Even if you have a plan, be prepared to pivot in this market. Maggie Moroney, 27, is trying to buy her first home in the Washington, D.C. area, but can't find anything affordable. Between sales and rentals, there's low inventory in both markets. 

"I probably could try to buy something, but it'd be a little bit of a stretch, especially with interest rates," she said. Moroney doesn't want to rush the decision and plans to wait it out if she doesn't find a home she likes, with the hope that more inventory will start to hit the market. "I'd rather have a rental I'm not super in love with than a home I'm not in love with."

If you're teetering between buying a home and waiting, here are some factors to keep in mind.

1. Mortgage rates and price trends

In today's housing market, high prices along with home loan rates are two of the most important factors at play. Although mortgage rates fluctuate daily, they are expected to remain between 5-6% for the rest 2022 -- though what happens next with inflation will tell where rates are headed. So far, rates are already more than 2 percentage points higher than this time a year ago and passed the 5.5% mark in June, but seem to be evening out since the announcement of the Fed's fourth rate hike in July. 

Although rates dipped slightly with the most recent interest hike, it's still important to understand how the rate you lock in for your mortgage will impact your monthly payments, as well as the total amount you'll pay over the lifetime of your loan. 

For example, if you take out a 30-year fixed-rate mortgage to buy a $500,000 house at a 5.2% interest rate, you'll pay $488,000 in interest over the life of your loan. But if you wait and buy a $450,000 house at a 6.5% interest rate, you'll end up paying $574,000 in interest over the course of your mortgage. So even though you paid less for your home, you're paying more than the difference in price due to interest over three decades. 

Scaling back your budget and looking at homes that may be smaller or in less-expensive neighborhoods is an option to consider if higher mortgage rates have made your previous housing goals unattainable.

2. Financial and personal goals 

Homeownership is still considered one of the most reliable ways to build wealth. When you make monthly mortgage payments, you're building equity in your home that you can tap into later on. When you rent, you aren't investing in your financial future the same way you are when you're paying off a mortgage.

Another factor to take into consideration is how long you plan to live in the house. If you expect to live there for a decade or longer, you'll likely be able to refinance your mortgage to a lower rate, reducing your monthly payment in the process. However, if you plan to move in a few years, it likely won't make financial sense for you to refinance. In that case, it's worth considering an adjustable-rate mortgage, which can help offset today's high mortgage rates by offering you a lower initial interest rate that only adjusts or increases later on in your mortgage term.

3. Future housing trends and recession risks

As buyer competition decreases when buying a home becomes increasingly unaffordable, it could mean that inventory opens up where you're looking. In June, the national inventory of available homes grew by 18.7% this year compared to last year. More available inventory means that you have more homes to choose from, increasing the chances you can buy something you actually want this year versus scrambling in a bidding war for whatever is available in your budget.

But there's also talk of a looming recession. If you wait to buy instead, you could avoid potentially overpaying for a home that could lose its value in an upcoming economic downturn, said Torabi. Plus, if the economy slows down, it's possible the Federal Reserve will raise interest rates less aggressively, which could benefit potential homeowners trying to lock in a better rate on their mortgage. 

Is it better to rent than buy right now? 

It depends, especially when we're dealing with an unpredictable period of high inflation. 

On one hand, if you buy a house and secure a fixed-rate mortgage, that means that no matter how much prices or interest rates go up, your fixed payment will stay the same every month. That's an advantage over renting since there's a good chance your landlord will raise your rent to counter inflationary pressures. Right now, rents are rising faster than wages, and if homebuyers are priced out of the housing market, there'll be more pressure to rent, which will increase competition. Many are already experiencing a red-hot rental market, leading to rental bidding wars and evictions. 

On the other hand, even though a fixed-rate mortgage can offer you more predictability and budget stability, "as long as inflation continues to outpace wages, there could be benefits to renting right now as the economy worsens," said Torabi. 

For example, one advantage of renting over buying is that you can save the cash you would have otherwise needed to use for a down payment. In a time of economic uncertainty, if you don't have to worry about coming up with a down payment and emptying most of your entire bank account to secure yourself a home, you can stay more liquid. Having more cash on hand can offer you added security if a recession negatively impacts your financial situation.

"It's important to know the differences in cost of owning a home versus the cost of renting," said Robert Heck, vice president of mortgages at Morty, an online mortgage marketplace. "How much is homeowners insurance going to cost? How much are the annual property taxes? Maybe you're not used to paying property taxes if you've been renting. Consider the costs that will go into maintaining a home."

Ultimately, whether you rent or buy often comes down to practical considerations like whether you need more space to start a family, or your lease is ending -- regardless of market conditions.

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Should you buy a home in 2021 should you buy a home before selling should you buy a refurbished computer should you buy travel insurance should you buy tesla stock should you buy extended warranty should you pop a blister how many eggs should you eat

Should You Buy a Home in 2022? Here's What You Need to Know

Should You Buy a Home in 2022? Here's What You Need to Know

This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.

After two years of a wildly hot and competitive housing market with skyrocketing home prices, there are some signs indicating that these record-high spikes might start leveling off. This past April, home price increases declined for the first time in four months, as did sales of new homes. 

But many experts note that, given the ongoing shortage of properties, home prices will still continue to go up in 2022 -- just at a slower pace. Plus, prospective new homeowners have to contend with relatively high mortgage rates, which keep monthly mortgage payments expensive. Although mortgage rates have dropped slightly since the Federal Reserve announced its fourth rate hike of the year to continue combating inflation, they're still more than 2% higher than they were at the beginning of 2022. So homebuyers should expect their mortgage payments to be higher this year, even if lessening demand decreases competition for homes.

"If we've seen the peak in inflation then we have seen the peak in mortgage rates," said Greg McBride, chief financial analyst at CNET's sister site, Bankrate. "The outlook for a weaker economy will hold sway as long as inflation pressures begin to show evidence of easing. If we get a couple months down the road and that hasn't happened, then all bets are off."

Even though mortgage rates appear to be leveling off, when taking all of these factors into account, a homebuyer will now pay almost 47% more for the same property compared with a year ago, according to Realtor.com. 

Buying a home is one of the most important money moves you'll ever make. It's an exceptionally personal decision that requires evaluating your long-term goals while making sure you're financially ready, from the down payment to interest on a home loan. Your job stability, household needs and the inventory available where you want to live all play a role in determining what makes sense for you. 

Here are the most important things to consider when buying a house in 2022, including why it might make sense to wait or to rent instead of buy. 

Key factors to consider when buying a home in 2022

Right now, home prices are still seeing double-digit growth nationwide and all-cash offers still make up around a quarter of housing bids, according to Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors. Does that mean you should try to hold off until prices start going down? Not necessarily.

The first thing to keep in mind is that expert predictions are imperfect. No one knows what's going to happen with the economy, even with warning signs for events like recessions. And timing the market, or trying to make decisions based on what you think will happen to prices or rates in the future, is generally not a sound strategy. "With housing, buyers tend to obsess over home values and how buying at a certain time may be better for appreciation and equity," said Farnoosh Torabi, personal finance expert and editor-at-large at CNET. "That's important, but your monthly housing payment is what really matters in the end."

Even if you have a plan, be prepared to pivot in this market. Maggie Moroney, 27, is trying to buy her first home in the Washington, D.C. area, but can't find anything affordable. Between sales and rentals, there's low inventory in both markets. 

"I probably could try to buy something, but it'd be a little bit of a stretch, especially with interest rates," she said. Moroney doesn't want to rush the decision and plans to wait it out if she doesn't find a home she likes, with the hope that more inventory will start to hit the market. "I'd rather have a rental I'm not super in love with than a home I'm not in love with."

If you're teetering between buying a home and waiting, here are some factors to keep in mind.

1. Mortgage rates and price trends

In today's housing market, high prices along with home loan rates are two of the most important factors at play. Although mortgage rates fluctuate daily, they are expected to remain between 5-6% for the rest 2022 -- though what happens next with inflation will tell where rates are headed. So far, rates are already more than 2 percentage points higher than this time a year ago and passed the 5.5% mark in June, but seem to be evening out since the announcement of the Fed's fourth rate hike in July. 

Although rates dipped slightly with the most recent interest hike, it's still important to understand how the rate you lock in for your mortgage will impact your monthly payments, as well as the total amount you'll pay over the lifetime of your loan. 

For example, if you take out a 30-year fixed-rate mortgage to buy a $500,000 house at a 5.2% interest rate, you'll pay $488,000 in interest over the life of your loan. But if you wait and buy a $450,000 house at a 6.5% interest rate, you'll end up paying $574,000 in interest over the course of your mortgage. So even though you paid less for your home, you're paying more than the difference in price due to interest over three decades. 

Scaling back your budget and looking at homes that may be smaller or in less-expensive neighborhoods is an option to consider if higher mortgage rates have made your previous housing goals unattainable.

2. Financial and personal goals 

Homeownership is still considered one of the most reliable ways to build wealth. When you make monthly mortgage payments, you're building equity in your home that you can tap into later on. When you rent, you aren't investing in your financial future the same way you are when you're paying off a mortgage.

Another factor to take into consideration is how long you plan to live in the house. If you expect to live there for a decade or longer, you'll likely be able to refinance your mortgage to a lower rate, reducing your monthly payment in the process. However, if you plan to move in a few years, it likely won't make financial sense for you to refinance. In that case, it's worth considering an adjustable-rate mortgage, which can help offset today's high mortgage rates by offering you a lower initial interest rate that only adjusts or increases later on in your mortgage term.

3. Future housing trends and recession risks

As buyer competition decreases when buying a home becomes increasingly unaffordable, it could mean that inventory opens up where you're looking. In June, the national inventory of available homes grew by 18.7% this year compared to last year. More available inventory means that you have more homes to choose from, increasing the chances you can buy something you actually want this year versus scrambling in a bidding war for whatever is available in your budget.

But there's also talk of a looming recession. If you wait to buy instead, you could avoid potentially overpaying for a home that could lose its value in an upcoming economic downturn, said Torabi. Plus, if the economy slows down, it's possible the Federal Reserve will raise interest rates less aggressively, which could benefit potential homeowners trying to lock in a better rate on their mortgage. 

Is it better to rent than buy right now? 

It depends, especially when we're dealing with an unpredictable period of high inflation. 

On one hand, if you buy a house and secure a fixed-rate mortgage, that means that no matter how much prices or interest rates go up, your fixed payment will stay the same every month. That's an advantage over renting since there's a good chance your landlord will raise your rent to counter inflationary pressures. Right now, rents are rising faster than wages, and if homebuyers are priced out of the housing market, there'll be more pressure to rent, which will increase competition. Many are already experiencing a red-hot rental market, leading to rental bidding wars and evictions. 

On the other hand, even though a fixed-rate mortgage can offer you more predictability and budget stability, "as long as inflation continues to outpace wages, there could be benefits to renting right now as the economy worsens," said Torabi. 

For example, one advantage of renting over buying is that you can save the cash you would have otherwise needed to use for a down payment. In a time of economic uncertainty, if you don't have to worry about coming up with a down payment and emptying most of your entire bank account to secure yourself a home, you can stay more liquid. Having more cash on hand can offer you added security if a recession negatively impacts your financial situation.

"It's important to know the differences in cost of owning a home versus the cost of renting," said Robert Heck, vice president of mortgages at Morty, an online mortgage marketplace. "How much is homeowners insurance going to cost? How much are the annual property taxes? Maybe you're not used to paying property taxes if you've been renting. Consider the costs that will go into maintaining a home."

Ultimately, whether you rent or buy often comes down to practical considerations like whether you need more space to start a family, or your lease is ending -- regardless of market conditions.

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