Why homebuyers should get pre-approved before rates fall
Hope for interest rate cuts was high at the start of 2024. With inflation falling and hints that interest rate cuts would soon follow, many borrowers were optimistic that relief was imminent. While that hope dimmed following disappointing inflation reports for December and January, most still expect rate cuts to come this year, with some predicting them as soon as May or June.
Homebuyers, in particular, are eager to see rates drop after they hit their highest point since 2000 in 2023. When the benchmark interest rate does fall, however — and when mortgage rates follow — buyers should be prepared to act. A new rate environment is likely to bring in new buyers and more competition and current buyers will need to stand out. Fortunately, there are ways to do this right now.
Start by seeing what mortgage rate you could qualify for here now.
Why homebuyers should get pre-approved before rates fall
While getting pre-approved by a mortgage lender doesn't guarantee that you'll be able to secure the home of your dreams, it will show sellers that you're a serious and committed buyer. By doing this now, before rates fall and the spring real estate market activity surges, you'll be more prepared to act and make an offer versus buyers just starting. And in today's unique mortgage climate, that could be a major advantage.
Even if you haven't yet found a home you want, it makes sense to act now, as many mortgage pre-approvals can last two to three months. This will allow you to focus more on finding the right home at the right price in the best neighborhood versus shopping for lenders and approval after you've found the home you want.
Just be sure to keep your credit score as high as possible and your overall credit profile as clean as you can during that two- to three-month window. If you don't — and you need to get pre-approved again after that time — you could complicate the process and affect what you're offered.
Ready to get started? Learn more about your homebuying options here today.
Other ways to improve your homebuyer profile
While getting pre-approved for a mortgage now can help improve your homebuyer profile, it's not the only way. Specifically, you'll also want to:
- Keep your credit score high: As mentioned above, your credit is vital when buying a home. So keep your score in top shape. The best terms and rates will be reserved for you if you do. Lenders will want more paperwork and be less likely to approve you quickly if your score is low. As a result, you could miss out on the home you want to buy.
- Put down a larger down payment: By making a 20% down payment, you'll not only avoid having to pay private mortgage insurance (PMI) but you'll show that you have the financial support necessary to buy the home you want.
- Limit your contingencies: In the current real estate market, cash is king — and contingencies are frowned upon. So, if you know you need your current home equity to buy a different property, consider putting your home up for sale now. Whatever you can do to limit your contingencies and show the seller that you're ready to act promptly, the better your profile will appear.
The bottom line
While a mortgage pre-approval doesn't necessarily guarantee homebuying success, it can certainly help you stand out amid a competitive crowd. And with rate cuts imminent for this year, that crowd is certain to grow. By getting pre-approved now, keeping your credit score high, putting down a larger down payment and limiting your contingencies, however, you can develop a more well-rounded buyer profile. This will improve your chances of success both now and when you ultimately find a home you want in the future.
