What homebuyers should (and shouldn’t) do immediately after a rate cut, according to mortgage experts

Homeownership has continued to feel out of reach for millions of Americans this year. Part of the issue is that 30-year fixed mortgage interest rates now hover between about 6.5% and 6.8%, while home prices remain high in most markets. The Federal Reserve is expected to issue the first rate cut of 2025 later this month, though, which could mark a turning point for borrowers and offer relief to prospective homebuyers.

But mortgage professionals warn that hasty decisions or common misconceptions can be costly in the aftermath of rate cuts. You could even miss out on your dream home due to poor timing or strategy. So, what should (and shouldn’t) you do right after the Fed formalizes a rate cut in September? Below, experts share their insights to help you capitalize on improved market conditions.

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What homebuyers should (and shouldn’t) do immediately after a rate cut, according to mortgage experts

Here are three things experts say you should do — and three you should avoid — after a rate cut:

Do get a fresh pre-approval

“Rate cuts usually lead to an increase in loan applications of between 15% and 20% in the first two weeks,” says Jeffrey Hensel, a broker associate at North Coast Financial, an asset-based hard money lender. This uptick in buyer interest makes it essential that you have a freshly updated preapproval on hand to stand out to sellers, as the impact of a rate cut on your buying power can be substantial.

Steven Glick, director of mortgage sales at real estate investment fintech company HomeAbroad, recalls working with a couple in September 2024. 

“They’d been pre-approved at 6.8% but updated it post-cut to 6.4%, which bumped their budget by $25,000 without changing their down payment,” Glick says.

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Do compare lenders and strategically lock your rate

“Not all lenders adjust their pricing the same way after a Fed move,” says Debbie Calixto, sales manager at loanDepot. “Comparing offers ensures you’re not leaving money on the table.”

Glick had a client who compared five quotes and locked at 6.2% with a lender offering no-closing-cost refinancing perks. It saved her $200 monthly versus sticking with her bank. That’s $2,400 per year simply from taking time to compare options.

Once you find the best mortgage loan rate, lock it in quickly. 

“Locking protects against hikes while you close,” Glick says. Most lenders offer 30- to 60-day rate locks for homebuyers.

Do act promptly, but stay disciplined

“Lower rates often bring a surge of buyer activity,” says Calixto. “Acting quickly gives you a competitive edge, but it’s important not to let urgency cloud your judgment.”

Take time to review properties and inspection results thoroughly despite the faster pace. And before making any offers, assess your complete financial picture. 

“Review your debt-to-income ratio (aim for under 43%) to avoid surprises,” says Glick. Factor in closing costs, which typically run 2% to 5% of your loan amount, plus ongoing expenses, such as homeowners association (HOA) fees.

Don’t assume your present lender will offer the best deal

“The pricing structure of credit unions, community banks and specialized lenders varies,” Hensel says. While your current lender may offer convenience, shopping around could unlock much better mortgage rates and terms.

Hensel recently helped a client secure a rate 0.6 percentage points below their big bank by moving to a portfolio lender. 

“That saved $180,000 in interest over the life of the loan,” Hensel says.

Don’t think rates will keep falling

Timing the market often backfires because mortgage rates seldom travel in a straight line. It’s better to buy a home when it aligns with your budget and needs instead.

Hensel points to a 2020 buyer who hoped for a 2.5% rate instead of taking 2.8%. “He’d go on and buy at 3.4% and pay an extra $40,000 because of price increases in the interim,” Hensel says. 

Meanwhile, Glick had a client who held off in 2022, thinking more cuts were coming. “Rates spiked to 7% instead, and he overpaid $30,000 on a rushed bid,” Glick says.

Don’t overextend your budget

“A 0.5% drop might add $50,000 to what you qualify for, but that can lead to overbuying and financial strain if life throws curveballs like job loss,” says Glick. 

He worked with a family who stretched to $500,000 post-cut, but later discovered that some property taxes that weren’t originally accounted for eroded their savings. This forced them to take on a side hustle to afford their home.

So, it can make sense to stick to conservative guidelines, even when mortgage lenders approve you to borrow more. Glick recommends keeping housing costs under 28% of your income and building in a 20% cushion for taxes and insurance.

The bottom line

The September Fed rate cut can create exciting opportunities, but success depends on preparation and realistic expectations. If you have a current mortgage loan with a rate above 7%, refinancing your loan could offer meaningful monthly savings, especially if you plan to stay put. Regardless of whether you’re buying or refinancing, though, Calixto suggests consulting a home lender who can analyze your situation. Rate cuts don’t affect all loan programs equally, so the mortgage rate advice that works for your neighbor might not be the best for you.