Should You Wait for Mortgage Rates to Drop Before Buying Your First Home?
Should You Wait for Mortgage Rates to Drop Before Buying Your First Home?
By Jason Maxam | Creative 1st Mortgage
If you are renting and thinking about buying your first home, there is a good chance one question keeps coming up:
Should I buy now, or should I wait for mortgage rates to come down?
There is no single answer that works for everybody.
A better place to start is with the payment you can comfortably afford today, the type of home you need, the cash you have available, your credit and income situation, and the mortgage programs that may fit you.
That was one of the biggest points I shared during my conversation with Julie Gardner of Rise Up Wealth. A buyer should not build a homebuying plan around guessing what interest rates might do next. Build the plan around your actual financial situation.
That changes the conversation.
In this conversation with Julie Gardner of Rise Up Wealth, I break down the questions first-time buyers ask me every week, from waiting on rates to choosing a comfortable payment, understanding loan programs, and preparing before applying.
Being Approved for More Does Not Mean You Should Spend More
One of the easiest mistakes to make as a first-time buyer is confusing the amount a lender says you may qualify for with the amount you actually want to spend every month.
Those are two different numbers.
During the interview, I talked about working backward from the payment a buyer and their family feel comfortable making. Once we understand that number, we can start looking at a realistic purchase price and loan structure.
That approach matters because your mortgage payment is only part of the cost of owning a home.
Depending on the property and loan, your total monthly housing expense may also include:
Property taxes
Homeowners insurance
Mortgage insurance
Homeowners association dues
Maintenance and repairs
With a fixed-rate mortgage, the interest rate and scheduled principal-and-interest payment stay fixed. Your total housing payment can still change if taxes, insurance, or mortgage insurance change. The Consumer Financial Protection Bureau makes that distinction clear.
So instead of asking, “How much house can I qualify for?” I prefer a different question:
What monthly housing expense lets me own the home without making the rest of my life miserable?
Should You Wait for Mortgage Rates to Fall?
Maybe.
But “I am waiting for rates to come down” is not a complete financial plan.
Nobody knows exactly where mortgage rates will be six months, one year, or two years from now. If rates fall, waiting could help your purchasing power. At the same time, the price of the home you want could change while you wait.
That is why I like comparing the numbers instead of making the decision based on headlines.
In the webinar, we discussed an example using home appreciation to show why waiting for a lower rate can have another cost.
That principle still makes sense, but the appreciation assumption should be based on current local data rather than automatically assuming every home rises 3% to 5% every year.
For example, FHFA data for the first quarter of 2026 showed Alabama home prices up about 2.36% year over year, while the Birmingham metro index was up about 4.27%. Nationally, FHFA reported a 1.7% year-over-year increase.
That is exactly why I would not use one national percentage to make your decision.
Your market matters.
Your price range matters.
And the specific house matters.
A Better Way to Calculate the Cost of Waiting
If you are thinking about waiting, compare at least these numbers:
What would the payment be if you purchased a home today?
What are you currently paying in rent?
How much cash would you need to close?
What would happen if mortgage rates decreased?
What would happen if home prices increased?
What would happen if home prices stayed flat or declined?
How long do you realistically plan to own the home?
What other costs will homeownership add to your budget?
You are not trying to predict the future perfectly.
You are trying to see whether buying works under reasonable scenarios.
That is one reason we use rent-versus-buy and cost-of-waiting comparisons with buyers at JasonMaxam.com. The purpose is not to talk somebody into buying a house. It is to give them enough information to make a decision that fits their family.
You May Have More Mortgage Options Than You Think
Another reason buyers sometimes wait is that they assume they need perfect credit or a huge down payment.
That is not always the case.
There are several mortgage programs, and the right one depends on the borrower, property, income, credit, occupancy, location, and other eligibility requirements.
FHA Loans
HUD states that FHA-insured loans can allow a down payment as low as 3.5% for eligible borrowers. FHA loans also require mortgage insurance.
That can make FHA worth discussing for buyers who do not have a large down payment or whose financial profile does not fit the conventional option they originally expected.
VA Loans
Eligible veterans, active-duty service members, and certain surviving spouses may have access to VA-backed home loans.
The Department of Veterans Affairs states that qualifying VA purchase loans can offer no down payment when the purchase price does not exceed the appraised value and do not require PMI or FHA-style mortgage insurance. VA eligibility, lender credit and income standards, closing costs, and possible funding fees still apply.
USDA Loans
USDA's Single Family Housing Guaranteed Loan Program can provide 100% financing for qualifying borrowers purchasing eligible properties in eligible rural areas. Income, occupancy, location, and other program requirements apply.
The point is not that one of these programs is automatically best.
The point is that you should know what you qualify for before deciding that homeownership is out of reach.
Do Not Shop for a Mortgage Based Only on the Interest Rate
Rate matters.
It just is not the only thing that matters.
You also need to understand the loan type, term, closing costs, mortgage insurance, points, lender credits, cash required at closing, and how comfortable you are with the person guiding you through the process.
The CFPB currently recommends comparing at least three mortgage offers. It also advises buyers to compare loan terms, interest rates, down payment requirements, monthly payments, fees, points, taxes, insurance, and other costs.
Once you have a property and are comparing actual offers, the standard Loan Estimate makes it easier to compare loans on the same basis.
This is one place where working with a mortgage broker can be useful.
At Creative 1st Mortgage, my job is to look at the buyer's entire situation and find the mortgage structure that fits it. Creative 1st Mortgage describes its approach as providing access to a range of mortgage options with a focus on personal guidance and local service.
You can learn more about my approach at JasonMaxam.com.
Talk to a Loan Officer Before You Are Ready to Make an Offer
You do not need to wait until you find a house to start asking mortgage questions.
In fact, I would rather talk to someone several months before they plan to buy.
That gives us time to look at the situation without the pressure of a contract and closing date.
In the interview, I recommended that buyers considering a purchase in the next three to six months find out where they stand. That means looking at the expected price range, timeline, credit profile, income, assets, and anything that may need attention before they start making offers.
The CFPB also recommends obtaining preapprovals from multiple lenders when shopping for a mortgage and says multiple mortgage credit checks made within a short shopping period generally should not create a major impact on the borrower's credit score.
The earlier conversation can sometimes be the one that saves you the biggest headache later.
What Should You Avoid Before Buying a Home?
Once you begin the approval process, consistency matters.
During the webinar, I gave Julie a simple list:
Don't quit your job without talking to your loan officer.
Don't run out and finance the car you have been wanting.
Don't start opening new credit accounts.
And be very careful about co-signing debt for somebody else.
Why?
Because lenders evaluate your credit, debts, income, assets, and other financial information when determining whether a loan meets program and underwriting requirements. A major change can alter the financial picture used for your approval.
If something in your life does need to change, talk to your loan officer before assuming it will or will not create a problem.
What About Refinancing If Rates Drop Later?
Refinancing can be an option later.
It should not be treated as a promise.
If rates fall and your financial situation, property, equity, and loan eligibility support it, refinancing may make sense. But refinancing creates a new mortgage and comes with costs that need to be compared with the potential savings. CFPB guidance specifically recommends comparing the cost of refinancing with the expected benefit.
So I would never tell someone to stretch their budget today because they can “just refinance later.”
The home should make sense at today's payment.
A future refinance should be viewed as a possible opportunity, not the thing holding the original purchase together.
Renting Versus Buying Is a Personal Calculation
Renting is not automatically a bad decision.
Buying is not automatically a good one.
The right answer depends on how long you plan to stay, your cash position, your monthly budget, your local housing market, maintenance expenses, and what ownership means for your larger financial plan.
Homeownership does have one feature renting does not: part of a mortgage payment can reduce the principal balance and build equity over time. The CFPB notes that the principal portion of the payment reduces what you owe and builds equity.
There may also be federal tax benefits for some homeowners. Mortgage interest deductions are subject to IRS rules and limitations, so buyers should not assume every dollar of mortgage interest is deductible.
Run the numbers for your situation.
That is much more useful than repeating “renting is throwing money away” or “rates are too high to buy.”
The Right Time to Buy Is When the Numbers Work for You
You do not need perfect credit.
You do not necessarily need 20% down.
And you do not need to predict the exact month mortgage rates will reach their lowest point.
You need clarity.
What payment works?
What cash do you need?
What loan programs fit?
What could change if you wait?
What happens if rates move in either direction?
What kind of home actually fits your life?
Once those questions have answers, deciding whether to buy becomes a lot less emotional.
That is the work I enjoy doing with buyers. After more than two decades in mortgage lending, I have found that the best mortgage conversation is not about pushing somebody into a loan. It is about understanding the situation, laying out the options, and helping the buyer make a decision they can live with. Creative 1st Mortgage identifies Jason Maxam as a broker owner serving Alabama communities with more than two decades of mortgage experience.
More information about Jason Maxam and Creative 1st Mortgage is available at JasonMaxam.com.
FAQ
Should I wait until mortgage rates go down to buy a house?
Not necessarily. Compare what you can comfortably afford today with the possible cost and benefit of waiting. Rates could change, but home prices, rent, inventory, and your personal finances may change too.
How much should I spend on a house?
Start with a monthly housing expense you can comfortably carry rather than simply using the maximum loan amount for which you might qualify. Include taxes, insurance, mortgage insurance, HOA costs, and expected maintenance when looking at affordability.
Do first-time homebuyers need 20% down?
No. Depending on eligibility, loan programs may allow much smaller down payments. HUD says FHA down payments can be as low as 3.5%, while qualified VA and USDA borrowers may have zero-down-payment options.
Should I get preapproved before looking at houses?
It can be useful to speak with lenders before serious home shopping so you understand possible loan amounts, programs, payments, and issues that may need attention. CFPB recommends getting multiple preapprovals when shopping for a mortgage.
Can I refinance if mortgage rates drop after I buy?
Possibly. Refinancing depends on the future market, your finances, the property, loan eligibility, and whether the savings justify the cost of getting a new loan. It should not be assumed or guaranteed.
What should I avoid after getting preapproved for a mortgage?
Avoid making major financial changes without first discussing them with your loan officer. That can include new debt, opening credit accounts, co-signing debt, or changing employment. Jason specifically discussed these risks in the interview.
Jason Maxam | NMLS# 330918 | Creative 1st Mortgage | NMLS# 2614631 | Licensed in AL, FL, KY, MN, TN & TX. This is not a commitment to lend. All loans subject to credit approval, income verification, and property eligibility. Program terms and availability subject to change without notice. FHA loans require mortgage insurance. Down payment assistance is provided as a second mortgage lien. Restrictions may apply.
