Mortgage Rates Have Started to Drop. Should You Try Buying a Home This Fall?

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You might save money on a mortgage this fall. But read on to see why waiting to buy a home could benefit you even more. [[{“value”:”

In 2020 and 2021, home buyers and refinancers alike enjoyed record-low mortgage rates. But mortgage rates started climbing in 2022, and they’ve been pretty high ever since.

Over the past few weeks, though, buyers have gotten some relief. In September, rates fell to as low as 6.09% before creeping back up slightly to 6.12% as of Oct. 3. Considering mortgage rates peaked at 7.76% in November 2023, that’s a world of a difference.

You may want to buy a home this fall, given that mortgage rates have dropped. And if you shop around with different lenders, you might even snag a below-average interest rate on your loan. Check out this list of the best mortgage lenders for big savings.

But you should also know that waiting a bit longer to buy a home could be a better move financially. Here’s why.

Mortgage rates are likely to continue falling

On Sept. 18, the Federal Reserve made its first long-anticipated interest rate cut of the year. The very next day, the average 30-year mortgage rate fell to 6.09%.

Now, it’s worth noting that mortgage rates don’t always rise and fall with the Fed’s benchmark interest rate. But generally speaking, when the Fed lowers the federal funds rate, borrowing tends to get less expensive across the board. And that includes mortgages.

Meanwhile, the Fed’s September interest rate cut is likely to be the first of several. The Fed raised interest rates 11 times between 2022 and 2023 to slow the pace of inflation. The Fed now needs to reverse those hikes, given that inflation has cooled nicely.

In the coming months, we should expect the Fed to continue lowering its benchmark interest rate. And there’s a good chance that mortgage rates will follow suit.

If you sit tight through early or mid-2025 before trying to buy a home, mortgages may become even cheaper to sign. And that could make homeownership more affordable for you.

Set yourself up to snag a great mortgage rate

Tempting as it may be to buy a home this fall, waiting until winter or spring could lead to even more savings. Plus, spring tends to be a popular time for sellers to list their homes, so you may have more inventory to choose from if you sit tight for another six months or so.

But in the interim, take steps to increase your chances of getting approved for a mortgage and locking in a great rate. Having a higher credit score could help, so spend the next few months paying bills on time and reviewing your credit report for errors.

Also, if possible, work on reducing your existing credit card balances. That could not only help your credit score improve, but also reduce your debt-to-income ratio, which is another factor that mortgage lenders consider when deciding whether to approve you and what rate to offer.

Of course, if you find the perfect home next week and it falls into your price range, you may not want to pass up that opportunity. The point, however, is that mortgage rates are likely to keep falling from where they are today. If you can hold off on a home purchase beyond the fall, it could mean snagging a better deal overall.

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