What homebuyers shouldn’t do before a September rate cut, according to experts

As the Federal Reserve prepares for its September meeting, mortgage applications have dropped, recently reaching their lowest point since May, according to the Mortgage Bankers Association. Prospective homebuyers and homeowners who want to refinance their mortgage loans are hoping for rate cuts that could bring relief from today’s rates, which average around 6.75% currently.

This wait-and-see approach to the rate climate could backfire, however. Today’s climate of economic uncertainty makes rate predictions difficult, and certain missteps during this limbo period can hurt your chances of securing favorable mortgage loan terms later. 

Recognizing these risks, we asked mortgage professionals to identify the biggest mistakes homebuyers make while waiting for rates to drop — and what you should do instead. Below, they share their insights.

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What homebuyers shouldn’t do before a September rate cut, according to experts

Avoid these pitfalls if you’re serious about buying a home soon, experts say:

Changing jobs before loan approval

“Stability is key in mortgage underwriting,” says Debbie Calixto, sales manager at mortgage lender loanDepot. “Switching jobs, especially within a different industry, or moving from a salaried role to commission-based income or self-employment, introduces risk.” These changes can delay approval or require additional documentation and a longer employment history.

Variable earners may face greater challenges. Anthony Simeone, executive vice president and chief lending officer at Ridgewood Savings Bank, recently saw this firsthand with a client. After switching jobs, the client lost his loan qualification because the new employer couldn’t guarantee the same bonus structure that the borrower had in his prior position.

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Opening new loans or lines of credit

“Taking on new debt can lower your credit score and increase your debt-to-income (DTI) ratio,” Calixto says. These factors can complicate mortgage qualification or limit your borrowing capacity.

Even small changes to your credit score or DTI ratio can hurt your approval chances. New credit card applications can cause temporary score declines, while car financing adds to your monthly obligations. Lenders compare your total debt payments to your income, so any new payment could push you over their limits.

Skipping mortgage preapproval

Preapproval gives you a clear idea of how much you can afford to spend on a home. Steven Glick, director of mortgage sales at real estate investment fintech company HomeAbroad, says buyers without it may struggle to compete. When you find the right home, you need to act fast, and sellers often favor buyers who already have financing lined up.

Getting preapproved is typically free and offers advantages beyond budget clarity. It can also secure your interest rate for a specific time period, giving you a safety net if rates climb while you shop. The process reveals credit or DTI issues early in the process, too, giving you time to fix problems and potentially save thousands of dollars over the life of your loan.

Assuming rate cuts guarantee lower payments

Buyers may think Fed rate cuts will slash their mortgage payments, but according to Glick, it’s not that simple. “Mortgage rates are tied more closely to the 10-year Treasury yield than the federal funds rate,” Glick says. “And markets often price in expected cuts ahead of time.” 

For example, a 25-basis-point Fed cut might only lower 30-year fixed rates by 10 to 15 basis points (e.g., from 6.85% down to 6.7% to 6.75%). Plus, increased buyer demand after a rate cut can push home prices higher, offsetting any rate savings. 

Last spring, Glick worked with a couple who waited for rates to drop before buying their first home. When they returned months later, rates had fallen by less than a percentage point. Meanwhile, home prices had risen. So, they ended up paying more per month than if they’d bought earlier, despite the lower rate.

Losing sight of the goal

When homebuying feels out of reach, prospective buyers may experience fatigue and give up. 

“I know it’s tempting to book a vacation with the down payment savings fund if buying a home doesn’t feel achievable right now,” says Grace Maxwell, broker and owner of mortgage brokerage Canter Financial. “But it can also mean that if the market shifts [favorably], you won’t be prepared to take advantage of it.”

What homebuyers should do instead

“Waiting for rates to drop without preparing is a missed opportunity,” Calixto says. She encourages using this time to strengthen your financial position.

Here are four ways you can do that, according to Glick:

• Boost your credit score: Aim for 740 or higher to qualify for the best rates.
• Save for a larger down payment: Putting 20% down reduces your loan amount and eliminates private mortgage insurance (PMI).
• Shop around: Compare at least three lenders to find the lowest annual percentage rate, not only the interest rate.
• Explore assistance programs: Look into first-time buyer grants and programs that help with down payments or closing costs.

The bottom line

Don’t let interest rate uncertainty stop you from buying the right home at the right price. As Simeone notes, “you can always refinance when interest rates come down. However, your purchase price is always your purchase price.” Start by getting pre-approved with several lenders to understand your options at current rates.