Let’s be straight about it: rates are high. The 30-year fixed averaged 7.18% for the week ending November 5, 2026 (Freddie Mac Primary Mortgage Market Survey), and the FHA math in this post uses 6.94% — the example rate I use across this site (Mortgage Reports put the FHA average at about that on November 6, 2026). That’s the market we’re in. Complaining about it doesn’t change your payment — doing the math does.
So here’s the math, and here’s how I decide whether buying still makes sense at these rates.
I talked this through on the podcast with Sarah Krasner, who’s been in the business 20 years and has seen rates hit double digits before. The original episode laid out five options for buying in a high-rate market, and they’re all still live — I’ve kept them below, updated with today’s numbers.
What a high rate actually costs you
Take a $700,000 house with an FHA loan, 3.5% down:
- Down payment: $24,500
- Loan: $687,321 (includes the 1.75% upfront mortgage insurance rolled in)
- Principal and interest at 6.94%: $4,545 a month
- Property tax: $729 a month (estimate — 1.25% of price per year)
- Homeowners insurance: $292 a month (estimate — about 0.5% of value per year)
- Monthly mortgage insurance: $315 a month
- Total: $5,881 a month
In plain dollars: for every $100 you bring home before taxes, FHA lets up to $56 go to your debts, house payment included. With no other debts, that’s about $126,000 a year. At my 25% rule — the payment I actually want you to live with — it’s $282,300.
Now compare that to a conventional loan at the headline rate. The Freddie Mac 7.18% is a conventional average — 20% down, excellent credit. On the same $700,000 house with 20% down ($140,000), the conventional payment is about $4,814 a month and takes about $160,482 a year at 36% DTI. Lower monthly payment, but more than five times the cash to get in. That’s the real trade in a high-rate market: FHA gets you in with $24,500 down; conventional costs less per month if you have the cash and the credit.
And here’s the part people miss: rates have actually been falling. Freddie Mac’s survey went 7.40% (October 15) → 7.32% (October 22) → 7.24% (October 29) → 7.18% (November 5, 2026). That drop — 22 points, and a “point” here means a hundredth of a percent, so 0.22% — saves about $103 a month in principal and interest on a $700,000 FHA loan. A quarter-point drop from today’s FHA rate — 6.94% to 6.69% — would save about $115 a month. Real money. But it doesn’t turn a house you can’t afford into one you can.
Five options for buying in a high-rate market
These are the five options from the original episode, in the order we talked about them:
1. Buy down your rate — you may be surprised how much lower you can get.
Paying points buys your rate down. One point is 1% of the loan amount, and as a rule of thumb one point buys about 0.25% off your rate. Here’s a real example: on a $687,321 loan, going from 6.94% to 6.69% with 1 point ($6,873) saves about $115 a month — breakeven in 60 months. If you’re staying past five years, it pays. If you’re moving in three, you just gave the lender $6,873 for nothing.
And ask who pays the points. Seller credits change the answer completely — if the seller pays the point, the breakeven is zero months. That’s a negotiation, not a product. Run it in the Mortgage Payment Calculator with your real numbers, and ask me to check the buydown before you commit to it.
2. Work with a lender who will refinance you in the next year or two at no cost.
If you’re willing to wait and you’re planning on staying in the home for more than a few years, it can make sense to work with a lender who will refinance you at no cost when rates drop. Many lenders will do that if you used them for the original loan — ask about it up front and keep in touch with your loan officer, who’ll have a beat on the rates and can tell you when a refinance actually makes sense. One caution from the episode: only buy on this plan if you’re comfortable at your current rate. A future refinance is a bonus, not the plan — if the payment only works after a refinance, it doesn’t work.
3. Try a different loan structure — a 2-1 buydown or an ARM.
With a 2-1 buydown, your rate is lowered by 2% for the first year and 1% for the second year. The difference is paid upfront into a holding account — usually by the seller or the builder as an incentive. That’s not the same as buying points. On a 6.5% rate, that means 4.5% in year one, 5.5% in year two, then 6.5% after that. If rates don’t improve in those two years, you still saved money and the step-ups weren’t a surprise. If rates do drop, you can refinance without penalties.
An ARM (adjustable rate mortgage) is another option: your rate is lower for a fixed period, usually 5 years, then it adjusts on a set schedule based on market rates. If you don’t plan on staying in the home more than five years, it can work — after that, you’d refinance or sell before the higher rate kicks in. Talk to your lender about all of it. There is no one-size-fits-all answer, and some lenders have programs I haven’t covered here.
4. Look at homes that have been on the market over 30 days.
Your buying power has likely dropped because your pre-approval was written at a lower rate, or you’re starting out with a budget that isn’t what it could have been. Homes sitting 30–45 days — especially ones with no price reductions — are where you can offer below ask and still get accepted. Don’t worry about “offending” the seller; it’s about making a competitive offer that’s still within your budget and approval. In a high-rate market, average sale prices drift below list price — put an offer under the list price, and you might be surprised what a seller will accept.
5. Look for homes offering seller concessions.
Instead of lowering the price, many sellers entice buyers by helping pay some closing costs — including rate buydowns. If you’re looking at a home at the top of your price range and rates have pushed it out of reach, a seller credit toward a buydown can put you back at the rate you need to qualify. It’s also a straight way to save on closing costs, which are expensive on their own.
Three ways buyers handle high rates
1. Buy the payment, not the rate.
This is my rule. If $5,881 a month works for your life today — you can pay it, save a little, and sleep at night — then the rate is just a number on the paperwork. If it doesn’t work, no rate forecast fixes it. Don’t buy a payment you can’t live with because someone told you rates are coming down.
2. Use a buydown — but only if the math clears.
Covered above in option 1: one point on a $687,321 loan buys about 0.25% off your rate and saves about $115 a month, breakeven in 60 months. If the seller pays the point, the breakeven is zero months. Run it before you commit.
3. Use assistance to fix the cash problem, not the rate problem.
High rates hurt, but for most first-time buyers the cash is the harder wall. FHA needs 3.5% down with a 580 credit score (10% down at 500–579; under 500, you’re not eligible). FHA has no income limits, and it’s for your primary residence only. On top of that, CalHFA MyHome offers up to 3.5% of the price on an FHA loan as a deferred-payment second, and GSFA Platinum offers up to 5% of the loan with no first-time-buyer requirement. One honest warning: CalHFA Dream For All is closed — its 2026 window ran February 24–March 16, 2026. Anyone still selling it as open is working off old information. MyHome and GSFA are the open alternatives.
One more thing to know about FHA at 3.5% down: the 0.55% annual mortgage insurance lasts the life of the loan — it doesn’t cancel the way conventional PMI can at 80% loan-to-value. That’s the trade-off. FHA gets you in with less down and looser credit; conventional costs less over time if your credit is strong enough.
When waiting is the right call
I’m not going to tell you to buy no matter what. Waiting wins when:
- The payment only works if rates drop. That’s a bet, not a plan.
- Buying empties your savings to zero. Closing costs add roughly $14,000 to $35,000 on top of the down payment on a $700,000 house.
- You’re moving in under five years. Renting usually wins on that timeline.
- Your debts are eating your approval. A $600 car payment shrinks the house you can buy more than a quarter-point of rate does. Kill the car payment before you shop.
Waiting loses when you’re just scared of the number on the rate sheet while your payment actually works. California’s median home price was $899,720 in September 2026 (California Association of Realtors, released October 19, 2026), up 1.7% from a year ago. Prices near $900,000 aren’t waiting for you.
My Take
Buy the payment, not the rate.
What to do with this
- Run the full payment in the Mortgage Payment Calculator — principal, interest, tax, insurance, MI, all of it.
- If the cash is the wall, read Down Payment Assistance in California: Every Program Worth Knowing in 2026.
- If your credit is under 680, read FHA Loan in 2026: What It Actually Costs Per Month.
- For the buydown math, come to my webinar — Price Reduction or Seller Credit?, Wednesday, November 18, 2026, 10:00–11:00 AM PT.
- Then start your pre-approval and I’ll run your exact numbers at today’s rate.
Hear me walk through this on the podcast: “Buying a Home in a High-Interest-Rate Market” (August 31, 2026).
Numbers in this post use the FHA rate from Mortgage Reports, November 6, 2026, and the Freddie Mac rate from November 5, 2026. Property tax (1.25%) and insurance (~0.5% of value, about $292/month) are estimates — your county and your quote will differ. No HOA included. This is education, not a rate quote or a loan approval. NMLS 1379110.