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What homebuyers should (and shouldn’t) do as they wait for mortgage interest rates to drop
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If you were a homebuyer looking for a home last summer, you didn’t have many options for securing a cost-effective mortgage. Inflation was still high, the federal funds rate was elevated to its highest point in decades and mortgage interest rates had risen in tandem, growing to the highest level since 2000.
But things are changing.
Inflation has steadily cooled this year (it dropped for the fourth consecutive month in July) and multiple cuts to the federal funds rate, currently frozen at a range between 5.25% and 5.50%, appear imminent. Mortgage interest rates have already cooled in light of these developments, down by around a point from where they were toward the end of 2023. And they can and likely will fall further if the Federal Reserve takes action during their final three meetings of 2024.
Understanding this dynamic, then, homebuyers should consider taking some specific steps now while avoiding other, simple but easy-to-make mistakes. To that end, below we’ve gathered a list of what homebuyers should and shouldn’t do as they wait for mortgage interest rates to drop.
Start by seeing how low of a mortgage interest you could lock in here now.
What homebuyers should (and shouldn’t) do as they wait for mortgage interest rates to drop
While every buyer’s financial situation differs, many would benefit from taking a nuanced approach now. Here’s what they should (and shouldn’t) do:
Do: Shop around for lenders
To improve your chances of getting the lowest rate and most favorable terms, start shopping around for lenders now. But don’t just look at the rate as a low one could get eaten up by excessive fees, penalties and closing costs. Compare quotes from at least three different lenders to establish a baseline that you can use as rates fall.
Get started with an online marketplace that compares multiple lenders online today.
Don’t: Pass up on your dream home
If you find your dream home now and can afford the mortgage payments, even if they’re higher than you’d like to pay, buy it anyway. Most experts recommend an approach of “dating the rate and marrying the home.” In other words, today’s rates will drop in the future, so don’t get too hung up on paying slightly more to start. But that dream home won’t remain on the market forever and, if you wait, you could permanently lose the opportunity.
Do: Precisely calculate your budget
A home purchase, for many Americans, is the largest one they’ll make in their lives. It’s critical, then, to precisely calculate your budget in advance so you know exactly what you can and can’t afford. With rates seemingly changing every day, you should complete these calculations, both with the rates that are available now as well as with those that could be available at the time you’re ready to buy your home.
Don’t: Wait for the perfect rate
Waiting for the perfect rate could be a major mistake. Yes, mortgage interest rates are likely to fall, perhaps significantly, in the weeks and months to come. But the perfect one, or even rates in the 2% to 3% range that were readily available a few years ago, are highly unlikely to return soon, absent a major economic driver. So don’t wait for that to happen or you could be waiting (and renting) for a long time.
Do: Contact a real estate agent
An informed real estate agent could be the difference between you finding a home you love at a cost-effective price – and not. This is particularly true as the rate climate changes, which could complicate the homebuying process and drive up competition. In markets like the one buyers are entering now, a professional real estate agent could be well worth the minor percentage you’ll have to pay for their services at closing time.
Don’t: Overextend yourself
A home purchase can be rewarding in multiple ways, particularly with the security it offers you and your loved ones. But that reward can easily feel like a punishment if you overextend yourself financially. While a cooling interest rate environment may lead you to buy a more expensive home than you normally would, it’s important to avoid the temptation to overextend yourself and, instead, stick to the budget you’ve already precisely calculated.
Learn more about your current mortgage options here.
The bottom line
Cooling mortgage interest rates present an opportunity for millions of potential homebuyers now. To capitalize on this timing, however, they’ll want to make select moves in advance and avoid other ones as best they can. By doing so, they’ll better position themselves for financial success in a home they truly love.
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These days, you’ll find Peggy Noonan in many places: in front of commencement crowds, at political round tables, and for the past quarter-century, in the opinion section of the Wall Street Journal. But when she was just starting out in Washington, D.C., you could find Noonan at the Off the Record Bar, near her job at the White House. “I would sit over there by myself, I would order a beer or a glass of wine, and I’d just quietly sit and read,” she said.
In 1984, Noonan joined President Ronald Reagan’s staff, after working at CBS in New York. At first, she felt like an outsider in the buttoned-up West Wing, but soon became an acclaimed speechwriter. Early on, she wrote Reagan’s moving speech for D-Day’s 40th anniversary.
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Then, when the Challenger shuttle tragically exploded, Noonan was given a tough assignment: write Reagan’s address to a distraught nation. “I had a feeling of, that didn’t work, nothing worked, because nothing was worthy of that moment; nothing was worthy of that day,” she said. “But then Frank Sinatra called – he called that night to the White House to say, ‘Mr. President, you just said what needed to be said.’ And Frank didn’t call after every speech!”
By the late eighties, Noonan had cemented a reputation as a wordsmith, and Reagan turned to her for his farewell address:
“We made the city stronger, we made the city freer. All in all, not bad, not bad at all.”
George H.W. Bush turned to Noonan, too, as he rallied Republicans on his way to the White House. “You know, part of life is luck,” she said. “It was not lucky to follow dazzling Ronald Reagan and be plainer, seeming sturdy George H.W. Bush. But I believe history was not – certainly in his time – sufficiently fair to him.”
That opinion is one of many found in the pages of her new book, “A Certain Idea of America,” a collection of her recent work (to be published Tuesday by Portfolio).
Portfolio
Asked what her idea of America is today, Noonan replied, “Big, raucous, troubled, frayed.”
Noonan’s columns often delve into questions of character and leadership. “What I do not perceive now is many politicians who are actually saying, Guys, this is not good for the country. We’ve been given this beautiful thing called America. Shine it up! Keep it going!”
Costa said, “You have a lot of fun in this book, doing what you call taking the stick to certain people from time to time.”
“I don’t mind the stick at all,” said Noonan. “When I see something that I think is just awful, I love to get mad at it. I got mad at John Fetterman.”
“You don’t like that he’s wearing shorts?”
“It’s okay with me that he wears shorts,” she replied, “but he is not allowed to change the rules of the U.S. Senate to accommodate him in his little shorts and hoodie because he enjoys dressing like a child.”
Noonan, now 74, grew up in the Democratic strongholds of New York and New Jersey. “And I was very happy with that, because Democrats were cooler than Republicans,” she said. “Democrats were little Bobby Kennedy, and Republicans were, like, Dick Thornburgh!”
But in Reagan, she saw something fresh. “You looked at him, you saw his confidence, and it made you feel optimistic,” she said.
The Gipper, of course, no longer dominates the Republican Party, and President-elect Trump’s victory could transform the GOP even more in the coming years. “In terms of policy, the Republican Party has changed by becoming, not a standard, usual conservative party, but a populist party,” Noonan said. “Its issues have changed very much. But also, the edge of anger and resentment and, I’m afraid, a little paranoia that is in the Republican Party now would be something that Reagan did not recognize.”
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At the Off the Record Bar, the faces on the wall – caricatures of politicians of the past – and at the tables still catch her eye. For Noonan, it’s all part of the story – America’s, and her own.
Costa said, “In a way, you’re still the writer in the corner watching everybody at the bar in Washington.”
“Yeah, I like to watch them, she said. “They’re human, and you bring a little warmth to it, a little humor, and always bring your stick and smack them when you need to! It’s kind of nice.”
READ AN EXCERPT: “A Certain Idea of America” by Peggy Noonan
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Story produced by David Rothman. Editor: Joseph Frandino.
