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Many Americans have been holding off on buying homes over the last few years due to the sharp increases in mortgage rates and home prices that occurred over the last couple of years. The average 30-year fixed mortgage rate reached a 23-year high of 7.79% in October 2023 after hitting a record low of 2.65% in January 2021. The average sale price of U.S. homes also increased by about $120,000 during the pandemic.
However, these elevated levels now appear to be the new normal. Home prices have stabilized, and mortgage rates have been holding in the 6% to 7% range since the Federal Reserve’s long-awaited rate cuts began in September 2024.
With only two additional Fed rate cuts predicted for 2025, mortgage rates aren’t likely to fall much more this year. And, if you’ve been wanting to buy a home, experts say January can be a good time to start the process by getting preapproved.
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4 reasons to get preapproved for a mortgage loan this January
By requesting preapproval for a mortgage, you’ll find out how much home you can afford in the current market and what the cost would be to finance it. You’ll also get the preapproval letter you need to make an offer. But experts say getting preapproved this month can be a good idea for various reasons, including:
To get a headstart on other buyers
“Getting preapproved prior to the season will give you an advantage over other buyers,” according to Jeremy Schachter, branch manager at Fairway Independent Mortgage Corporation. You can watch as homes come on the market and will be better prepared to make an offer.
“If you got pre-approved in the past, more than likely, there is an expiration on that approval. It’s recommended if you’re dipping your toes back in the market, you talk with your lender to re-review your credit, income and assets,” Schachter says.
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To uncover potential problems early
Josh Lewis, a certified mortgage consultant at The Educated HomeBuyer, says January is an especially good time to get preapproved.
“Everyone has that ‘New Year, New You’ mindset and homeownership is often one of those goals,” Lewis says. Plus, getting a proper preapproval gives you a clear picture of your budget and uncovers potential issues early.
“I can’t tell you how many times I’ve seen buyers wait until spring to get preapproved, only to discover they need three to six months to address qualification issues – and by then, they’ve missed their ideal buying window,” Lewis says.
To get more personalized attention
January and February also tend to be slower months in real estate, according to Lewis. As a result, lenders, real estate agents and other professionals have more time to educate you and answer your questions.
“Once the spring buying season hits, everyone gets much busier and can’t provide that same level of attention,” Lewis says.
And this year is likely to be busy, according to Paul Miller, managing partner and certified public accountant at Miller and Company LLP.
“The competition for home-buying in 2025 will be sky-high due to built-up demand,” Miller says.
To gauge the rates you can get in the current market
It’s also a decent time to get preapproved in terms of rates, at least based on recent rate trends.
“Mortgage rates have been as low as 6% and as high as 8% over the past couple of years. We’re currently in the middle of that range, and while we can’t predict exactly where rates will go, getting pre-approved now helps you understand your options at current rates,” Lewis says.
He adds that with preapproval, you’ll be ready to act quickly if rates improve or you find the right house.
The bottom line
If you want to get preapproved for a mortgage this month, a good place to start is shopping around and collecting quotes from a few lenders. From there, you can request preapproval from the lender that offers you the best deal.
“Remember — a preapproval costs nothing and typically lasts for 90 to 120 days, so there’s no downside to getting prepared early,” Lewis says.