Mortgage Rates Reach Highest Level Since 2008 Housing Crash

That's not great news for buyers at all.

Last year, home prices were sky-high and housing inventory was extremely limited. But things weren't all bad in the real estate market, because buyers got to enjoy competitive borrowing rates on a mortgage. 

This year, however, mortgage rates have been on the rise. And while home price gains are finally cooling, property prices are still quite inflated. As such, today's buyers face a real challenge.

Recently, mortgage rates really spiked. On Sept. 8, the average 30-year mortgage rate reached 5.89%, according to Freddie Mac. That's the highest number on record since November 2008, just after the housing market crash. 

In fact, one year ago, the average 30-year mortgage rate was just 2.88%. And while 5.89% isn't outrageous in a historical context, it's way more than what borrowers were paying just a year ago.

If you're thinking of buying a home, you may be wondering if rising mortgage rates should prompt you to reconsider those plans. Here's what you need to know.

Don't get in over your head

The double whammy of higher home prices and mortgage rates makes today a pretty tough time to purchase a home. But if you're not sure whether you should pause your home search or not, then you should run some numbers.

As a general rule, if you're buying a home, your housing costs, including your mortgage, property taxes, insurance, and any other predictable expenses, should not exceed 30% of your take-home pay. And so if you can manage to buy a home while sticking to that limit, then higher mortgage rates don't necessarily have to be a deterrent. 

Remember, mortgage rates tend to rise and fall over time. If you get stuck with a higher mortgage rate, you can always try to refinance that loan down the line once rates dip back downward. Plus, there are steps you can take to eke out some mortgage rate savings -- even at a time when borrowing has gotten costlier.

How to snag a lower mortgage rate

While mortgage rates may be up today, one of the best ways to score some savings is to come in with a high credit score -- ideally, one in the upper 700s or higher. That sends the message that you're not a huge credit risk, and a lender might reward you with a lower borrowing rate as a result.

At the same time, be sure to shop around with different mortgage lenders so you can compare their offers. You never know when one lender might be willing to offer up a lower rate than its competitors to drum up business. Just remember to compare closing costs as well as rates in the course of your shopping so you don't get stuck with higher-than-average fees to finalize your mortgage.

Although we're well past the days of ultra-low borrowing rates that buyers got to enjoy last year, today's housing market situation isn't hopeless. You may find that you're able to move forward with homeownership plans even with mortgage rates being as high as they are.