Interest Rates 101: What You Need To Know
Interest Rates 101: What You Need to Know Before Buying a Home
At Ernest Homes, we believe knowledge is one of the most powerful tools a homebuyer can have. Whether you’re building your first home or moving up to your forever home, it’s important to understand how today’s interest rates impact your buying power—and why they shouldn’t hold you back from one of the most meaningful investments of your life.
Below, we break down interest rates in simple terms, explain current market trends, and walk through steps you can take to secure the best mortgage possible.
What Are Interest Rates?
Interest is the fee a lender charges for borrowing money—the cost of financing your home. When interest rates rise, the cost of borrowing increases. When they drop, your buying power increases.
Since 2022, the Federal Reserve has raised rates to help control inflation. Although mortgage rates are still higher than the historic lows of the pandemic years, they have remained under 7% in 2024 and have shown signs of gradual decline thanks to cooling inflation and pauses in rate hikes.
According to Forbes, most experts expect rates to trend downward through 2024. The Federal Reserve has signaled potential cuts, but they will only occur when inflation is firmly moving toward their 2% target.
If You’re Applying for a Mortgage Right Now
No matter what the market is doing, these timeless strategies help you secure a better mortgage:
- Improve your credit score. A score of 620+ is needed for most conventional loans, and the best rates go to borrowers with the strongest credit.
- Save for a larger down payment. A 20% down payment removes PMI and may reduce your interest rate. First-time buyers may also qualify for down payment assistance programs.
- Know your debt-to-income ratio (DTI). Lenders compare your monthly debt to your gross income. Lower DTI = stronger application.
- Compare loan types.
- 30-Year Fixed: Most common and predictable.
- Adjustable-Rate Mortgage (ARM): Starts lower; adjusts later.
- FHA Loan: Lower credit + lower down payment options.
- VA Loan: Great rates for eligible service members and veterans.
Should You Buy Down or Lock Your Rate?
Rate Buydown: Pay upfront to temporarily lower your rate. Ideal for buyers whose income will increase or who want lower early payments.
Rate Lock: Protects your rate from increasing while you close. If your lender offers a float-down option, you may benefit if rates drop during your lock period.
Why Now Is Still a Great Time to Buy a New Ernest Home
- A calmer market. With fewer bidding wars and more available inventory, you can choose a home you truly love without pressure.
- Rates likely to drop later. Even if you buy now, refinancing later can lower your long-term cost—but you won’t miss out on the perfect home today.
- Prime Savannah-area locations hold value. Our communities offer strong long-term appreciation and the lifestyle benefits homeowners want most.
- Quick move-in homes are available. Choose from beautiful, professionally designed homes that are ready now—or personalize a plan that fits your needs.
Connect With Ernest Homes—We’re Here to Help
Interest rates may change, but owning a home you love has lasting value. If you’re ready to explore your options, browse our communities throughout Savannah and Coastal Georgia, explore our floor plans, or reach out to our team anytime. We’re here to make your homebuying journey easier, clearer, and more enjoyable.
