3 Reasons Not to Sign a Mortgage This Summer

You may not want to lock in a home loan just yet.

Buying a home has its benefits, and if you've been renting for quite some time, you may be eager to break that cycle and purchase a place of your own. But before you rush to sign a mortgage this summer, you may want to consider the upside of putting that plan on hold. Here's why you shouldn't get a mortgage in the coming weeks.

1. Borrowing rates are high

Mortgage rates have been flip-flopping in recent weeks, and at the start of August, they dipped just below 5% for the first time in months. Despite that drop, today's borrowing rates are still considerably higher than they were at the start of the year, or at this time in 2021. And there's really no reason to rush into a mortgage at a time when you're not looking at any sort of discount.

2. Home prices are still elevated

Home price gains have, in recent months, started to slow. But that doesn't mean the real estate market is loaded with bargain properties. Quite the contrary -- homes are still very expensive across the board. And because housing inventory is still low, sellers are getting away with charging more.

Granted, you might manage to find a reasonably priced home in the neighborhood you'd like to buy in. But guess what? If a true bargain hits the market, it will probably attract hordes of prospective buyers, leading to a massive bidding war. That's not necessarily something you want to experience.

3. A recession could be brewing

The Federal Reserve has been hiking up interest rates in an effort to slow the pace of inflation. As a result, borrowing money is getting more expensive, and that could lead to a pullback in consumer spending.

To be clear, that's what the Fed wants. But it only wants consumer spending to decline to a moderate degree. If that happens at a drastic clip, it could spur a recession -- something many financial experts are convinced is unavoidable.

In light of that, you may want to hold off on getting a mortgage until economic conditions stabilize. If a recession hits and your job lands on the chopping block, that could make for a very stressful financial situation. At a time when there's so much uncertainty, you may be better off sitting tight and waiting to take on the expense of a mortgage.

Also, you'll need to bring a down payment to the table to close on a mortgage. But you may want to hang onto your cash reserves in case economic conditions sour, rather than tie that money up in a home.

It could really pay to wait

If mortgage rates and home prices were lower, and if the economy was in a more steady place, then the summer of 2022 would be a good time to purchase a home. But since the opposite holds true on all accounts, you may be better off waiting on that mortgage -- even if it means having to rent a home a bit longer.