Homebuyers

What You Need to Do Right Now to Take Advantage of Lower Rates

After months of persistently high borrowing costs, homebuyers and homeowners are finally seeing some significant relief to their bottom line.

Mortgage rates have dropped to their lowest level in nearly a year, with the average 30-year fixed-rate loan now at 6.35% in the week ending Sept. 11,  according to Freddie Mac. That was down from 6.5% just a week earlier.

“Last year, buyers were wrestling with 30-year mortgage rates hovering around 7%, the highest levels in two decades,” said Cynthia Mattiza, a real estate professional at Kuper Sotheby's International Realty in Austin, Texas. “Now, with rates edging lower, the buying conversation has shifted.”

With economists expecting more easing later this year if the U.S. Federal Reserve continues to lower rates, now may be a good time to get your finances in order. This can help you act quickly when the right home comes along.

Here’s how to make the most of this window of opportunity, whether you’re home hunting, already own a property, or are just trying to plan ahead.

Why a lower mortgage rate matters for you

For many homebuyers, lower rates offer a chance to rethink their homebuying or refinancing strategy.

When borrowing costs decrease, your homebuying budget goes further. The recent drop in mortgage rates is notable, and market analysts foresee borrowing costs falling even more.

“Fed rate cuts don’t directly set mortgage rates, but they can ease broader borrowing costs and take some pressure off of mortgage rates,” said Hannah Jones, senior economic research analyst at Realtor.com. “[This] potentially gives buyers a welcome affordability boost if [housing] supply can keep up with any uptick in demand.”

(The Fed’s benchmark rate is separate from mortgage interest rates. However, if the Fed signals a rate cut is likely, mortgage rates often fall.)

Lower borrowing costs mean more purchasing power for buyers and may help you access better neighborhoods, larger homes, or monthly payments you can more comfortably manage.

How to take advantage of lower rates if you’re buying a home

Think of today’s low-to-mid-6% rates as an invitation to get your finances in order.

Before you start home hunting, review your credit score and pay down debt. Even a small boost in your credit profile can help you get a better rate. Gather your documents (W-2s, bank statements, and proof of assets) so you’re prepared.

Here’s what else buyers need to know:

Ask about temporary buydowns or lender credits. Builders and lenders are rolling out more creative incentives again, which can shave some money off your first years of payments.

Get pre-approved now. For first-time buyers, this kind of preparation “makes a big difference in inventory options and buying power,” said Mattiza.

And don’t forget to do the math on what a rate drop can buy you.

For example, at 7%, a $400,000 mortgage runs roughly $2,661 a month in principal and interest. (This doesn’t include property taxes, insurance costs, and homeowner’s association dues.)

At 6.35%, that same loan drops to about $2,496. That’s a savings of more than $150 a month, or nearly $60,000 over the life of a 30-year loan.

Think of what that extra money could do: cover utilities, pad your emergency fund, or pay for a long-planned renovation.

How to take advantage of lower rates if you’re a homeowner

If you have a mortgage with a rate in the 7% range, the latest rate drop could make refinancing attractive.

Refinancing can free up cash for home improvements, help reduce other debts, or simply give your monthly budget more breathing room.

Owners should consider closing costs, which generally run about 2% to 6% of the loan. But if you plan to stay in the home for several years, the monthly savings may quickly exceed the initial fees.

So, if you’re considering a refinance, start now by pulling your credit report, gathering income documentation, and comparing lenders.

Mattiza said she’s already seeing more buyers and sellers jump back in as rates ease.

“The rate drop benefits many, as it gives hope to sellers [that there will be more buyers,] gives buyers more buying power,” added Mattiza.

Does timing the housing market work?

Should buyers wait for rates to drop further before making a decision? Not necessarily. While lower rates improve affordability, housing prices and competition also play a role.

If you wait until rates really fall and more buyers jump into the market, home prices are likely to climb. The savings from a lower rate could be offset by a higher purchase price.

A smart middle ground is to get pre-approved for a mortgage at current rates but keep an eye out. Many lenders allow you to lock in today’s rate while also offering “float down” options if rates dip before closing. That way, you’re covered either way.