Why right now is a perfect time to save for a down payment

Lately, it seems like it’s never a good time to buy a house. It is, however, a fantastic time to save for a down payment.

The homebuying frenzy that ensued in 2020 and 2021 thanks to record-low mortgage rates is long over. The shift was swift and dramatic, caused by the Federal Reserve’s aggressive rate hikes as it battled inflation. Now, buyers confront mortgage rates not seen since the early aughts — and, as a result, must come to grips with their diminished purchasing power.

On the bright side, the very same rate hikes have resulted in much higher yields on savings accounts. If you’re interested in buying a home in the next few years, you can use this to boost your down-payment fund. Below, Select breaks down how you can take advantage of the current high-interest environment if you’re planning to buy a house in the near future.

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How high rates can help you save for a home while making buying one harder

If you had hoped to own a home in the next few years, you might feel that your prospects are getting bleak.

There’s no saying when (or if) mortgage rates will fall back to the 3% range. The limited inventory has also kept home prices from really dropping off after they soared to terrifying heights during the homebuying binge. It’s no wonder that home sales have been on a consistent decline — housing unaffordability is a dreadful turnoff. 

Consider this: Let’s say you want your monthly payment to be around $1,700 and are saving to put 20% down. In 2021, you could get a mortgage rate of around 3%, depending on your credit and overall financial circumstances. In this situation, you could afford a $400,000 home. But now that the rates hover at about 7%, you can…

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