The latest mortgage interest rate drop should be approached strategically by homebuyers.
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The recent trend of mortgage rates dropping doesn't appear to be over.
Rates on a 30-year mortgage declined again this week, according to new data from FreddieMac. Averaging just 6.27% now, rates here are at their lowest level in around a month. While not quite as affordable as the 6.13% they hit before the Federal Reserve cut rates in September (a three-year low at the time), they're heading back in the right direction for buyers eager to re-enter the market.
But that doesn't mean buyers should rush into the process either, especially considering the unique climate they now find themselves in. While it's always important to be strategic in the homebuying process, it's arguably especially so now, with items like inflation, interest rate policy and domestic economic policies all playing a role. By making select moves (and avoiding others) now, buyers can better improve their chances of success. Below, we'll break down two things to do and two others to avoid now that mortgage rates are heading back down again.
Start by seeing how low of a mortgage interest rate you could qualify for here.
What homebuyers should (and shouldn't) do now that mortgage rates just dropped again
To take advantage of this new affordability in the mortgage market, homebuyers should consider the following dos and don'ts now:
Do: Get pre-approved
A mortgage pre-approval can go a long way. Not only will it let you know how large a loan lenders will and will not realistically approve you for, but it will also help you better tailor your home hunt. It will also show sellers that you're serious about any bids you submit and that you have the financial backing and documentation to support that bid. Many sellers won't even deal with a buyer who doesn't have a formal pre-approval to accompany any offers. So, don't be one of those buyers. Get pre-approved right now.
Learn how to get pre-approved for a mortgage now.
Don't: Assume rates will keep falling
It can understandably be tempting to assume that mortgage rates will keep falling, especially with the understanding that they were around 7% just earlier this year. So waiting for them to fall further seems to make sense on the surface. But mortgage rates don't always move in a linear fashion. They can easily tick back up should market conditions change.
And you don't need to look too far to see an example of this, as it just occurred last year. Mortgage rates in September 2024, for example, plunged to a two-year low right before the Fed cut rates but then rose sharply in the months that followed. Don't let that happen again. If you can afford today's rates and have a home that you want to buy, do so. You can always refinance, should rates continue to decline in the future.
Do: Start home hunting
As mentioned, if you can afford today's rates and don't mind getting started on your home search as the holiday season approaches, it's worth starting now. This doesn't mean that you need to visit the first open house you see listed. It does, however, mean narrowing down your search to select ZIP codes, researching real estate agents and maybe even lawyers. And it can extend to setting up appointments to visit the houses you've found online. New rates offer new homebuying opportunities, and those will be more readily available for aggressive house hunters. Which leads to the next point …
Don't: Assume the conventional homebuying seasonal rules apply
Spring is the traditional season for homebuyers. The cold weather has passed, it's easier to view homes both inside and outside, and if you find a home you ultimately decide to buy, you can time the closing to take place in the summer, and you can move in then, before school starts anew in the fall. But it would be a mistake to assume the conventional homebuying season will neatly fall into March and April again.
New, lower rates will attract more competition right away, and that's likely to skew the calendar. Don't assume that there will be fewer buyers to compete against now, as there would be if you were typically purchasing a home in the fall. There's a lot of pent-up demand, and as rates approach the 5% range, more buyers are expected to resurface. Be well prepared for longer lines at open houses, more offers to compete against and less flexibility on behalf of sellers than you'd normally expect around this time of year.
The bottom line
A further decline in the mortgage rate climate can lead to exciting new opportunities for homebuyers. But there will be some mistakes to avoid in this environment as well. By taking the above approaches and circumventing some of these easy-to-make mistakes, homebuyers can make these new opportunities work well for them both during the purchase process and, ideally, over their extended homeownership journey.
Edited by Angelica Leicht
