After hovering at historic lows, mortgage rates began climbing last year, with the 30-year fixed-rate mortgage topping 7% in the fall. So far in 2023, the average 30-year fixed has bounced around between about 6% and 7%.

Since March 2022, the Federal Reserve has raised the federal funds rate 10 times; the most recent increase took effect May 4. The federal funds rate, the short-term rate banks pay for borrowing money from one another, influences mortgage rates.

» MORE: Fed easing rate hikes may be good news for housing market

Higher rates shrink buying power because they make home loans more expensive.

For example, the monthly payment for a $350,000 house with a 20% down payment would be $1,257 with a 3.5% mortgage rate, not including home insurance and property taxes. With a 6.5% rate, the monthly payment would be $1,770 — $513 higher.

You can't influence average rates, so focus on the things you can control:

• Shop around for the best deal. Given today's higher rates, buyers can save $600 to $1,200 a year by applying from multiple mortgage lenders, according to a February 2023 study by Freddie Mac, the government-sponsored entity that buys conforming loans from mortgage lenders.

• Make sure you can afford the monthly mortgage payment. A home affordability calculator can help you crunch the numbers.

• After getting approved for a home loan, consider locking in the mortgage rate until the loan closes to protect against further rate increases.

  Home supply still limited

  A shortage of homes for sale continues to make this a competitive market for buyers.

  "Multiple-offer situations have returned in the spring buying season following the calmer winter market," Lawrence Yun, chief economist of the National Association of Realtors, said in a May 18 press release.

  In April, there was a 2.9-month supply of homes on the market nationwide, according to the NAR, meaning it would take about three months at the current pace for all the properties to sell. That was up from 2.6 months in March and up from 2.2 months from the prior year. But the inventory is still well under the five- to six-month supply that's generally considered a balanced market with plenty of buyers and properties for sale.

  Although competition is still fierce, it isn't as wild as it was last year. On average, sellers are fielding fewer offers, and a smaller share of homes are selling above list price. Homes listed for sale in April received an average of 3.1 offers, compared with 5.5 offers a year ago, according to an NAR survey of its members. Of homes sold in April, 33% sold above list price, down from 61% in April 2022, according to the NAR.

  Homes are staying on the market a bit longer. Of homes sold in April, 73% were on the market for less than a month — compared with 88% a year ago, the NAR reports.

  » MORE: Suddenly, the market is not all about the sellers

  Year-over-year home prices flattening

  The national median price for existing homes sold in April was $388,800, down 1.7% year over year, according to the NAR. This was the third consecutive month that the price slightly declined year over year. February's tiny price drop from the prior year was the first decrease in more than a decade.

  Prices varied by region. The median price rose slightly year over year in the Midwest and Northeast but fell in the South and West. Here's a regional look at median prices and year-over-year price changes:

  • Midwest: $287,300, up 1.8%.

  • Northeast: $422,700, up 2.8%.

  • South: $357,900, down 0.6%.

  • West: $578,200, down 8%.

  As a buyer, lean on your real estate agent to understand home values in your area so you can make a competitive offer without overpaying.

  » MORE: What to expect when buying a house this year

  Your readiness to buy a home

  Ask yourself these questions to explore whether you're ready to buy a home.

  Prepared to put down roots?

  Think about your life goals, relationships and interests. How long can you see yourself living in this location?

  Ideally, you'd want to remain in the home long enough for rising property values and your equity to exceed the costs of buying and selling, including real estate commissions and mortgage closing costs. That will typically take several years.

  You could also be subject to capital gains taxes if the home appreciates in value and you sell it after less than two years.

  » MORE: Avoid capital gains on real estate

  How's your job security?

  A mortgage is a big commitment and can become a stressful burden after a job loss, so it's not a good time to buy a home if you think you'll get laid off.

  Wait until your employment is stable before thinking about buying a house.

  » MORE: What happens if you lose your job before closing on a mortgage?

  Are you financially prepared?

  Here are the three main ingredients to evaluate:

  Savings

  You'll need money for a down payment and mortgage closing costs as well as for moving and other expenses after you buy the home. The down payment requirements vary by the type of mortgage and the lender. The more you put down, the lower your monthly mortgage payment.

  The typical down payment for first-time buyers is 6% and for repeat buyers is 17%, according to an NAR survey of home buyers who purchased a primary residence between July 2021 and June 2022.

  » MORE: How to save money for a house

  Credit

  Lenders generally offer the best mortgage rates and terms to borrowers with credit scores of 740 and above, although you can qualify for a mortgage with a score in the 600s. The options are much slimmer and loan costs can be higher for borrowers with a score in the 500s.

  If your credit is marginal, it might make sense to postpone buying a house and use the time to work on building your credit.

  The average FICO credit score for closed mortgage loans to purchase homes in the past 30 days was 730, according to mortgage data provider ICE Mortgage Technology.

  » MORE: The credit score needed to buy a house

  Debt

  Lenders look at your debt-to-income ratio, or DTI, to help determine whether you qualify for a mortgage. Your DTI is the percentage of your monthly gross income that goes toward monthly debt payments, including housing costs, as well as car, student loan, credit card and other debt obligations. Lenders like to see a DTI under 36%, although it's possible to qualify with a higher ratio. The lower your DTI, the better your chances of qualifying for a mortgage and getting offered the lowest available rate.