09/16/25

Buying a home is a big financial decision. That fact never changes, even if the conversations about purchasing power and mortgage rates are always changing. You’ll likely hear about rates falling a bit in the near future, but what does that mean for those actively searching right now? We’ll break down some of the things prospective buyers should know.

Interest rates are related to mortgage rates, but they’re not the same. The interest rate from the Federal Reserve is not the same figure you’ll pay for your mortgage. There are a lot of factors that go into the latter, but that first number is worth paying attention to. Why? When the Fed cuts rates, mortgage rates do go down, though that drop often happens even before the official announcement due to the predictive nature of the financial world.  

A few tenths of a percent can make a BIG difference. It’s easy to gloss over the difference between a 6% rate and a 7% one, but it does matter. For example, on a $200,000 loan, a 6% interest rate translates to a principal and interest payment of about $1,199 per month. At 7%, that jumps to around $1,331. That’s more than $1,500 extra per year.

That’s why buyers often shop for rates or lock one in when they find a good option. After all, even a small adjustment in your rate can free up cash for other expenses. In addition, putting up a larger down payment is a great way to save more in the future, though that’s not always possible. That brings us to our next piece of advice.

Don’t forget to budget for other expenses. It is important to consider future costs. When calculating affordability, don’t just think about what you can qualify for. Instead, consider what you’re comfortable paying month after month.

Rules of thumb, such as the 28/36 rule (no more than 28% of your gross income on housing and no more than 36% on total debt), or the 30% take-home rule, are helpful guides. A conservative approach (basing your affordability on one income in a two-income household, for example) serves as an additional safety net.

Know your options. If you’ve saved some money, have your finances in decent shape and are ready to own your next home, there’s probably a way to get you into a house you’ll love. Talk to your lender and agent about other loan types, buyer assistance programs, and, depending on your market, seller concessions. During the fall and winter, many sellers may be extra motivated to sell their home to you. You may be able to use that to your advantage.   

Homeownership has always been about the long game. It’s not just good for your present, but also a way to prepare for your future. Thank you for trusting our teams to help you on the last part of your journey into a new chapter as your title and escrow provider. We’re always here for you!