Should you buy a home when rates are over 7%? Here are the best lenders for finding a deal

Experts predicted this would be the year of the sub-6% mortgage rate. Instead, it averaged 7.03% for the week ending Sept. 24, per Freddie Mac's Primary Mortgage Market Survey. 

That means someone who planned to buy a $410,700 home — the median home price in the second quarter of this year — with 10% down would pay $250 more each month, or $3,000 per year, than they would have with the 6% rate. What's more, rates are expected to remain high until the Iran war resolves, Realtor.com senior economist Jake Krimmel told CNBC Select. 

"The thing that hopefully will be going away is global uncertainty, higher gas prices, inflation," he said. Resolution to the conflict, "would be the best thing I think for mortgage rates come February and March." 

Meanwhile, housing demand is lower. Seventy percent of markets around the country are considered buyers' markets or are trending toward that designation, according to Realtor.com. This means more people are listing their homes than folks looking to purchase. In a buyer's market, sellers are more likely to cut prices, provide rate buydowns or cover closing costs to incentivize home shoppers to seal the deal.

"Buyers who are able to be in the market despite difficult financing conditions may be able to secure a home at a price that is lower than asking," Krimmel said.

CNBC Select explains what is keeping rates high, when rates are expected to drop and how to save when buying a home in this environment. Plus, we share our preferred list of lenders that offer lower-than-average rates.

Long-term mortgage rates, like the 30-year, track the 10-year Treasury yield —  the interest the government pays on a 10-year bond at any given point. 

Both mortgage rates and the 10-year Treasury yield are influenced by a number of factors, including federal monetary and fiscal policy, inflation and the larger economy, according to Fannie Mae.  Changes in the Federal Funds Rate, geopolitics, the national debt, and business trends affect how much interest you'll pay on a mortgage. 

Right now, the Iran War, rapid AI sector growth, global inflation and the Federal Reserve rate hike from Sept. 16, are all putting some upward pressure on rates, Krimmel said. 

"There are some that are interrelated, and there are some that are kind of just a coincidence that we're getting a couple of bad shocks all at once," he said. 

While some of these elements are likely a long-term reality, an end to the war in Iran and subsequent inflation could push rates down, Krimmel added.

Rates are not the only thing to consider when buying a home. You should also examine your financial situation, application strength, whether you can refinance in the future and if you can get a price cut that may offset the rate cost. After all, those factors can affect how much you'll pay. 

Prime your credit

Your financial situation is the most important element in deciding when to buy a home. Start by checking your credit score: A strong number can help you secure the lowest rate possible. 

Those with a credit score over 780 had an average mortgage rate of 6.85% on a 30-year fixed-rate mortgage as of September, while those with a credit score of 620 had an average mortgage rate of 7.61%, Experian data shows. 

Then, calculate what down payment you can afford. Homebuyers who put down 20% or more don't have to pay private mortgage insurance — which costs between 0.10% and 2.0% of the loan amount per year.

Look for price cuts

Even though sellers are more likely to cut prices right now, you likely won't get a large enough discount to offset the difference you pay on a mortgage at a 7% rate versus a 6% rate over the 30-year term. 

For example, at the median home price of $410,700, you'd need a 21.9% price cut to offset the $90,000 extra in interest you would pay over the life of the 30-year loan from that rate difference. However, the average price cut on new homes — which tend to be higher than on existing homes — was 6% in August, according to the National Association of Home Builders.

If you plan to buy now and refinance later when rates are around  6%, a price cut of under 10% could save you in the long run. Keep in mind, you'll have to pay closing costs on a refinancing, which can total 2% to 6% of the loan amount. 

If you have the budget to do this, making a purchase with a higher-rate loan in a buyer's market and getting a home at a lower price may be worth it. You can estimate costs with our mortgage calculator. 

Talk with a housing counselor or financial planner about your specific situation before you decide.  

Choose lenders with lower rates

You may also score a lower-than-average rate with the right lender and loan type. 

Government-backed mortgages offer lower rates. For example, as of Sept. 24, the average rate on a Federal Housing Administration (FHA) loan was 6.87% and the average rate on a VA loan was 6.89%, according to Mortgage News Daily.  

If you're a veteran or active service member, a VA loan may be worth considering. Navy Federal Credit Union (NFCU) consistently offers some of the lowest rates on the market. Plus, with NFCU, you can cut your rate without refinancing down the line for $250. 

If you haven't served in the military, you can still get a government-backed loan. Rocket Mortgage is the largest FHA lender in the country and has a stellar record of customer service. 

Some lenders, like Better Mortgage, offer lower rates on conventional loans than others. It also lets you combine your closing costs on refinancing, meaning you won't need to pay those expenses up front. Keep in mind, you will need to pay the closing costs — plus interest — over the life of the loan. 

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties and we pride ourselves on our journalistic standards and ethics.

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