The Latest News

Blog Categories

March 5, 2024

Interest Rates 101: What You Need To Know

As a leader in the homebuilding industry, Ernest Homes wants to be a resource for you throughout your homebuying process. We understand that you have many reasons why you’re looking for a new home. Interest rates shouldn’t hold you back from one of the greatest purchases you’ll make. 

Let’s look at what you need to know about buying a home in today’s market. 

All About Interest Rates

Interest is the amount charged on top of the principal by a lender to a borrower for the use of assets. An interest rate is essentially the "cost of money". Higher interest rates make borrowing the same amount of money more expensive. In terms of getting a mortgage, higher rates lower the buying power of prospective homebuyers. 

Since March 2022, when the Federal Reserve began aggressive interest rate hikes to tame inflation, mortgage rates have risen to decades-high levels. Recently, however, rates have receded due to the Fed’s rate-hike pauses and cooling economic data. Mortgage interest rates have remained below 7% in 2024 but are still higher than they were at this time last year. 

According to Forbes, most housing market experts expect rates to decline over 2024. However, the lower mortgage rates that analysts anticipate this year may not be enough to shift home affordability. The Fed’s latest projections suggest rate cuts are forthcoming. However, Fed Chair Jerome Powell has stated that officials will only begin implementing cuts once they’re confident that “inflation is on a sustainable path down toward 2%.” 

What To Do If You’re Getting A Mortgage Now

Mortgage rates are still higher than they’ve been in a long time, but the basic advice for getting a mortgage applies no matter the economy or market:

  1. Improve your credit score. A lower credit score won’t prevent you from getting a loan, but it can make the difference between getting a lower rate or more costly borrowing terms. To qualify for a conventional mortgage, you’ll generally need a credit score of 620 or higher. The best mortgage rates usually go to borrowers with the highest scores. The more confident the lender is in your ability to repay the loan, the lower the interest rate it’ll offer.
  1. Save for a down payment. Putting more money down upfront can help you obtain a lower mortgage rate, and if you have 20 percent, you’ll avoid private mortgage insurance (PMI), which adds costs to your loan. If you’re a first-time homebuyer and can’t cover a 20 percent down payment, there are loans, grants and programs that can help. The eligibility requirements vary by program but are often based on factors like your income.
  1. Know your debt-to-income ratio. Your debt-to-income (DTI) ratio compares how much money you owe to how much money you make, specifically your total monthly debt payments against your gross monthly income. 
  1. Check out different mortgage loan types and terms. A 30-year fixed-rate mortgage is the most common option, but there are other options. An adjustable-rate mortgage’s interest rate can fluctuate. The initial rate is lower and doesn’t change, but only for a specific amount of time. After that, the rate can go up or down depending on current market rates. This can be a good option for purchasing a starter home. An FHA Loan is insured by the Federal Housing Administration. Because of the government’s insurance, lenders require a lower down payment than a conventional loan. You may qualify for an FHA loan if you have debt or a lower credit score, but you’ll also have to pay mortgage insurance. A VA Loan is a special loan backed by the government and only available to active duty service members and their families, and veterans of the US military and their surviving relatives. VA loans are partially backed by Veterans Affairs (VA) and issued by private lenders. The down payment is usually 1-3% of the total loan, and the interest rates are generally lower than conventional loans. 

Should You Buy Down or Lock In An Interest Rate?

A mortgage rate buydown is a type of mortgage financing option where you pay an upfront fee to buy down or reduce the interest rate on your loan for an initial period. It helps lower the monthly mortgage payment during the early years of the loan. The main benefit of an interest rate buydown is that it reduces your monthly mortgage payment during the initial years of the loan term. This can provide financial relief for borrowers who expect their income to increase in the future or want to maximize their purchasing power. 

A mortgage rate lock keeps your interest rate from rising between applying for a mortgage and closing on your new loan. A rate lock allows borrowers to get the best mortgage rate possible while buying or refinancing a home. If interest rates go up after you’ve locked in your rate, you get to keep the lower rate. On the other hand, if you lock your rate and interest rates fall, you can’t take advantage of the lower rate unless your rate lock includes a float-down option. A float-down option allows you to take advantage of an interest rate decrease during your rate lock period.

Why Now Is A Good Time To Buy A New Home

Whether you’ve already decided to buy a new home or you’re still weighing your options, here’s why buying an Ernest home NOW is a good idea.

  • The market is more stable than it’s been in a while. With the chaos of the last few years settled you can take your time and look for a home that fits your family’s needs rather than worrying about bidding wars. While interest rates may be higher, you’re much more likely to find a home you’ll be comfortable in for decades to come. No buyer’s remorse here! 
  • Speaking of interest rates… Yes, they are higher than you wish they were. But, they are also not likely to stay that way. As the economy fluctuates, so do the rates. This means that at some point, you’ll be able to refinance your mortgage at a lower interest rate. Don’t miss out on the home you love because of interest rates.
  • Prime locations hold their value. We’re firm believers that the locations of our homes are just as much a part of their value as the homes themselves. That’s why we build in some of the most breathtaking locations in Savannah. The value of an Ernest home is steady and dependable. 
  • An opportunity missed is an opportunity lost. If you’ve found the home you want in a location you love, go for it! Don’t put your future on hold. With home designs that can be personalized to be as unique as you are OR gorgeous homes available RIGHT NOW, there’s no reason to wait. Ernest Homes is here to help you build the future you really want! 

Connect with Ernest Homes for Your New Home

Why buy now? You have the upper hand. Don’t lose it. There are so many good reasons to seize the opportunity and purchase a new Ernest home in Savannah, GA. If you are ready to buy, we are ready to build! Connect with us today. We’re here to make every part of the journey stress-free and enjoyable!


We're open! Our models are now open during normal hours, however, we are still offering virtual and private appointments. Contact us today to schedule!

Talk Now!