Mortgage Rates Are Going Down – What Can I Do to Get Mortgage Ready?

Key Takeaways

Reduce high-interest credit card debt to improve credit and cash flow
Build an emergency fund to handle unexpected costs without new debt
Improve and monitor your credit score for better loan terms
Save for a down payment and closing costs (and explore assistance programs)
Keep your financial profile stable before applying for a mortgage
Get pre-approved to know your budget and strengthen your offer

Mortgage Rates Outlook for 2025–2026

Mortgage rates are predicted to ease slightly throughout the rest of 2025 and improve gradually into 2026, according to Fannie Mae’s July 2025 Economic and Housing Outlook. While pandemic-level rates aren’t expected to return, even a 1% drop can mean significant monthly and lifetime savings.

How Would a 1% Rate Drop Impact Payments?

At 7% interest:

Loan Amount: $320,000
Monthly P&I: $2,129
Total Interest (30 yrs): $446,000

At 6% interest:

Loan Amount: $320,000
Monthly P&I: $1,919
Total Interest (30 yrs): $370,000

Savings:

Monthly: Approximately $210 less
Lifetime interest savings: Approximately $76,000*

What this means for you is that you will see savings in your monthly payment and even modest savings can free up money for other financial goals or homeownership costs. The good news is that most high authority sources are predicting that rates will ease as we enter 2026.

Steps to Get Mortgage Ready

1. Reduce High-Interest Debt

Start by paying down credit cards and other revolving debt to lower your credit utilization ratio.

Lenders like to see utilization below 30%, and under 10% can qualify you for the best mortgage rates.
Lower utilization boosts your credit score and improves your debt-to-income ratio, both critical for mortgage approval.

2. Build a Solid Emergency Fund

An emergency fund helps you handle unexpected expenses without resorting to credit.

Aim for 3–6 months of essential expenses in a savings account.
Lenders see this as a sign you can manage homeownership costs without missing mortgage payments.

3. Improve and Monitor Your Credit Score

Your credit score is a key factor in mortgage rates and approval.

Review your credit reports for errors and dispute inaccuracies through AnnualCreditReport.com.
Pay all bills on time because payment history is one of the largest factors in your score.
Avoid opening new credit accounts right before applying for a mortgage.

4. Save for a Down Payment and Closing Costs

While 20% down is ideal for avoiding private mortgage insurance and securing the best rates, there are loan programs with 3%–5% minimum down payments.
Closing costs typically run 2%–5% of the loan amount.
Explore state and local assistance programs or ask lenders about closing cost credits to reduce upfront expenses.

5. Keep Your Financial Profile Stable

In the months before applying:

Avoid large purchases or job changes
Don’t move large sums out of savings
Maintain consistent income and assets since lenders verify these carefully

6. Get Pre-Approved

A pre-approval (not just pre-qualification) shows you are a serious buyer.

It involves a full review of your income, assets, and includes a soft credit pull.
It gives you a clear budget range and strengthens your position with sellers in competitive markets.

When Debt Is Blocking Your Mortgage Approval

If high credit card balances prevent you from qualifying, consider working with a nonprofit credit counseling agency like American Consumer Credit Counseling (ACCC).

We provide expert credit counseling, budgeting help, and Debt Management Plans that can get you mortgage-ready in 24–36 months (often sooner).
Many clients significantly boost their credit scores after completing our program.
Warning: Avoid debt settlement programs since lenders may see that as a negative way to eliminate debt. And be cautious with debt consolidation loans because if you keep using your credit cards, your debt-to-income ratio can increase and make qualifying harder.

“I recently tried out American Consumer Credit Counseling’s budgeting and debt management program, and it’s been a game changer! They really helped me set my financial goals and get my spending in check. In just eight months, I already achieved the goal of buying my own home…” -Monica O.

If you are serious about getting mortgage ready and buying a home is your goal, you should prepare in advance. You can do it and ACCC and qualified mortgage and real estate professionals can help you.

If credit card debt is your biggest challenge, contact American Consumer Credit Counseling at 800-769-3571 for a free, no-obligation credit counseling session and get started on the path to financial and mortgage readiness today.