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Mortgage mistakes to avoid once interest rates are cut
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Homebuyers patiently waiting for a break with mortgage interest rates don’t have to wait much longer. Not only have rates fallen by more than a point from where they were at the end of 2023, but they will drop further in the weeks and months ahead if the Federal Reserve proceeds with an expected series of rate cuts. This will be welcome news for all types of borrowers, but specifically those looking for mortgages. After all, mortgage rates have increased exponentially from where they were in 2020 and 2021 and they hit their highest level since 2000 last summer. So any reprieve will be helpful, particularly as home prices continue to tick upward.
Like any financial product, however, homebuyers will need to take a nuanced and strategic approach when applying for a mortgage. And this is particularly true in the face of as many as three potential cuts to the federal funds rate this year. While there are multiple ways to prepare for mortgage interest rate cuts, there are also some easy-to-make mistakes that should be avoided. Below, we’ll break down three of them.
Start by seeing how low of a mortgage interest rate you could secure here now.
Mortgage mistakes to avoid once rates are cut
Here are three critical mistakes to avoid amid this unique homebuying season:
Assuming mortgage interest rates will fall in line with the Fed
Yes, a lower federal funds rate will lead to lower mortgage interest rates. But a reduction in the former won’t lead to an identical reduction in the latter. Mortgage interest rates follow the Fed, but they aren’t directly dictated by what the Fed does. So a 25 basis point reduction may not automatically result in a 25 basis point difference for mortgage interest rates. Many lenders may have already priced in these predicted rate cuts in their current offers. So, the difference in what you’re offered now and what you’re offered at the end of the month may be marginal. Be sure to account for this when trying to time your mortgage application.
Learn more about your current mortgage options online today.
Waiting for rates to drop even further later this year
As noted, mortgage interest rates don’t move in tandem with the Fed, so waiting for multiple rate cuts to come may not provide the relief you anticipate. But even if it did, waiting for rates to drop even further could cause its own set of complications. Once rates are cut, more buyers are likely to enter the market, causing competition for limited housing inventory to become stronger. And with more buyers for a finite amount of inventory, home prices, which are already averaging over $420,000 now, could rise even further. So consider these intangibles now, because a minor rate reduction in November, for example, may not be enough to outweigh a much higher home price.
Assuming you’ll get the rate listed on lender websites
Mortgage interest rates listed on lender websites and online marketplaces are designed to attract buyers, thus appearing lower than what you can likely secure. Remember, these rates are typically low because they’re listed for qualified borrowers with reliable income and high credit scores. If you don’t have both, the rate you’re offered could be significantly higher. Some lenders also account for mortgage points in the rates listed. So if you don’t want to pay the fee those points cost, the rate you’re offered could again be significantly higher. Understanding this, then, be sure to ask the lender you’re working with exactly what you’re eligible for because it may not be what you see listed online.
The bottom line
A cooling rate climate can be beneficial for homebuyers who have sat on the sidelines in recent years. To make the most of the opportunity, however, they should both take steps to prepare in advance for these developments and avoid making the above mistakes. By doing both they’ll better position themselves to secure a cost-effective mortgage loan, saving them time and money now and over the full term of the loan.
TRENTON, N.J. — Democratic Newark City Council President LaMonica McIver has defeated Republican small businessman Carmen Bucco in a contest in New Jersey’s 10th Congressional District that opened up because of the death of Rep. Donald Payne Jr. in April.
McIver will serve out the remainder of Payne’s term, which ends in January. She and Bucco will face a rematch on the November ballot for the full term.
McIver said in a statement Wednesday that she stands on the “shoulders of giants,” naming Payne as chief among them.
She cast ahead to the November election, saying the right to make reproductive health choices was on the ballot as well as whether the economy should benefit the wealthy or “hard working Americans.”
“I will fight because the purpose of politics and the purpose of our vote is to give the people of our communities and our nation a bold voice,” she said.
Bucco congratulated McIver on the victory in a statement but said he’s looking forward to the rematch in November.
“I am not going anywhere,” he said in an email. “We still have a second chance to make district 10 great again!”
Who are LaMonica McIver and Carmen Bucco?
McIver emerged as the Democratic candidate in a crowded field in the July special election. A member of the city council of New Jersey’s biggest city since 2018, she also worked for Montclair Public Schools as a personnel director and plans to focus on affordability, infrastructure, abortion rights and “protecting our democracy,” she told The Associated Press earlier this summer.
Bucco describes himself on his campaign website as a small-business owner influenced by his upbringing in the foster system. He lists support for law enforcement and ending corruption as top issues.
The 10th District lies in a heavily Democratic and majority-Black region of northern New Jersey. Republicans are outnumbered by more than 6 to 1.
It’s been a volatile year for Democrats in New Jersey, where the party dominates state government and the congressional delegation.
Among the developments were the conviction on federal bribery charges of U.S. Sen. Bob Menendez, who has denied the charges, and the demise of the so-called county party line — a system in which local political leaders give their preferred candidates favorable position on the primary ballot.
Democratic Rep. Andy Kim, who’s running for Menendez’s seat, and other Democrats brought a federal lawsuit challenging the practice as part of his campaign to oust Menendez, who has resigned since his conviction.
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Sean “Diddy” Combs at same Brooklyn detention center that held R. Kelly, Sam Bankman-Fried, other high-profile inmates
A second judge refused to grant bail to Sean “Diddy” Combs on Wednesday and he could remain in federal custody at a Brooklyn detention center until his trial for sex trafficking charges. Combs joins other high-profile inmates, such as singer R. Kelly, fallen cryptocurrency mogul Sam Bankman-Fried, rapper Ja Rule —even Al Sharpton served a brief stint— who were held at the same federal detention center.
Notorious for its horrible conditions —inmates won a $10 million class action settlement after enduring frigid conditions during an 8-day blackout in 2019— the waterfront industrial complex, MDC Brooklyn, houses 1,200 inmates.
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Violence and corruption have long plagued the facility; U.S. District Judge Gary R. Brown of the Eastern District of New York wrote the detention center had “dangerous, barbaric conditions” in a recent sentencing opinion. Two inmates were stabbed to death in recent months and several correction officers have been convicted for smuggling contraband and accepting bribes.
Combs joins a list of high-profile personalities that have landed at the MDC Brooklyn, partly because the city’s other federal detention center, MDC New York, closed in 2021, also due to horrible conditions. The disgraced financier Jeffrey Epstein died by suicide in his cell there in 2019. “Numerous and serious” instances of misconduct among corrections staff gave Epstein the opportunity to kill himself, a subsequent federal watchdog investigation found.
Kelly sued the federal detention center in 2022 for wrongly putting him on suicide watch after his sentencing. Kelly sought $100 million because he said the detention center knew he wasn’t suicidal after he was convicted in 2021 for racketeering and violating the Mann Act, which bars transporting people across state lines for prostitution.
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Former crypto billionaire Bankman-Fried survived on bread, water and sometimes peanut butter when he was in the MDC Brooklyn, his attorney said, because the detention center continued to serve him a “flesh diet” despite requests for vegan dishes.
Ja Rule stayed at the MDC Brooklyn for a brief time before being released after serving most of his two-year sentence for illegal gun possession. Most of his prison time was spent in a state prison in New York.
Sharpton served a 90-day sentence in 2001 and went on a hunger strike for protesting the U.S. Navy bombing of the island of Vieques, in Puerto Rico.
Combs was taken into custody on Monday and according to an indictment unsealed Tuesday he was charged with sex trafficking, racketeering conspiracy and transportation to engage in prostitution.
His attorney Marc Agnifilo told CBS News, “It’s impossible to prepare for a trial from where he is,” after a first federal judge denied Combs bail on Tuesday.
U.S. Magistrate Judge Robyn Tarnofsky agreed with prosecutors who argued the hip-hop mogul, who is accused of using his business empire as a criminal enterprise to conceal his alleged abuse of women, is a flight risk and poses an ongoing threat to the safety of the community.
Agnifilo said the part of the detention center where Combs is being held is “a very difficult place to be.”
contributed to this report.
