How improving mortgage rates drive purchasing power

December 17, 2023/Scott Sheldon

Are you in the market for a new home? You might want to take advantage of the current trend in interest rates. In recent weeks, interest rates have come down by about half a percent, which can mean a significant increase in your purchasing power. If you are pre-approved with a mortgage company and looking for a set purchase price, you might find that you can now afford a higher-priced home for the same payment…

For example, if you were previously capped at a $700,000 purchase price for a 25% down conventional 30-year fixed-rate mortgage loan scenario, and your pre-approved interest rate was 7.25%, you might now be eligible for an interest rate around mid-6 %. This reduction in interest rate might mean that your maximum purchase price is now around $720,000.

This is great news for families who are looking to purchase a new home. The reduction in interest rate can lead to a reduction in your monthly payment, which can make a significant difference in your budget. If interest rates continue to come down, your purchasing power will continue to rise, giving you more options and allowing you to potentially change the type of home you want and even the neighborhood you want to live in.

However, be aware that other buyers also now have more purchasing power, which can lead to a bidding war for the same property, potentially driving the price up. So, if you find a house that you like and can justify the payment, make an offer with your real estate agent. Remember, most purchase contracts these days have contingencies, including loan and appraisal contingencies, that allow you to get out of the transaction if things don’t go according to plan.

In conclusion, the current trend in interest rates can be a great opportunity for families who are looking to purchase a new home. It can increase your purchasing power and give you more options. However, it’s essential to work with a local loan officer and a real estate agent who can help you navigate this process and identify opportunities that can make your home purchase more friendly and effective.

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When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

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