Will you finally be able to refinance your mortgage this fall? Here’s what some experts predict.

The housing market has been tough on buyers over the past few years. Soaring home prices, bidding wars and mortgage rates that climbed from historic lows near 3% to above 7% priced out millions of potential homeowners. Many who did manage to buy during the rate surge now carry mortgages with payments that strain their budgets.

Conditions are shifting in favor of borrowers, however. Mortgage rates have declined recently, dropping to around 6.5% for 30-year fixed loans — the lowest levels since last October. Plus, the Federal Reserve’s anticipated rate cuts this fall could push rates even lower. This, in turn, could create the first real mortgage loan refinancing opportunity we’ve seen recently.

We spoke to mortgage experts to better understand whether this opportunity will pan out and learn who stands to benefit most from refinancing before year-end. Here’s what they had to say.

Find out what mortgage loan rates you could qualify for today.

Will you finally be able to refinance your mortgage this fall? Here’s what some experts predict

“This fall could be [a good refinancing time] for homeowners saddled with rates above 7% … especially if you’ve been paying 7.5% or higher from the peak,” says Steven Glick, director of mortgage sales at HomeAbroad, a real estate investment fintech company. 

With rates already down to around 6.5% and forecasts suggesting further drops, the opportunity window appears to be opening.

Debbie Calixto, sales manager at mortgage lender loanDepot, agrees. 

“The market is anticipating a 25-basis-point reduction in the federal funds rate by [fall or early winter],” Calixto says. “While this may not cause mortgage rates to drop instantly, it typically sets the stage for a gradual decrease to follow.”

Market timing isn’t everything, though. 

“Whether the fall brings a good opportunity depends more on [your] loan and financial situation,” Jim Breeze, senior vice president of mortgage product development at PNC Bank, says.

Who will benefit most from mortgage refinancing before year-end?

According to the experts we interviewed, you’ll likely benefit most from refinancing this fall in these scenarios:

• You have a rate above 7%. “Locking in now at mid-6% could save thousands annually while rates are dipping,” Glick says.
• You have a large loan balance. Homeowners with mortgages of $500,000 or more can benefit from even modest rate reductions as small as 0.375%, according to Tanya Bates, senior vice president and home loans regional director at BOK Financial.
• You have an FHA loan. “Even a 0.50% interest rate reduction can make refinancing worthwhile, particularly if your lender covers most or all of your closing costs through a streamlined program,” says Calixto.

Compare your mortgage loan options and find the right fit now.

3 steps to take before a potential mortgage loan refinance

Here’s what you should do to position yourself for refinancing success, experts say:

Pull your credit report and score

“Lenders want at least a 620 score for conventional loans,” Glick says. And, rate pricing often improves significantly at the 760 threshold, according to Breeze. However, “even modest credit score gains can make an impact,” Breeze says.

You can improve your credit score by making on-time payments, avoiding new credit card applications and disputing inaccurate information. “Fixing errors now can boost it by 50 to 100 points in a month or two,” says Glick.

Review your financial position

When you submit a mortgage refinance application, lenders will scrutinize your debt-to-income (DTI) ratio and home equity.

“Add up monthly debts, including the new mortgage estimate, and divide by [your] gross income,” Glick says. “Aim for under 43% [DTI] to qualify easily.” 

You’ll also want to confirm you have at least 20% equity in your home to avoid private mortgage insurance.

After calculating your DTI, take these steps to assess your position:

• Get an informal home appraisal using Zillow or a local agent.
• Clarify your refinancing goals (e.g., lower payments, long-term savings).
• Pay down debts if your DTI is too high.

Prepare the necessary documentation

“Lenders move fast when rates drop, and having [paperwork] ready shaves weeks off processing,” Glick says. “I’ve seen delays kill deals because folks scrambled last-minute.”

Start gathering these documents:

• Last two pay stubs and two years of W-2s or 1099s
• Personal tax returns (and business returns if self-employed)
• Two months of bank and asset statements
• Current mortgage statement and homeowner’s insurance policy
• HOA dues statement (if applicable)
• List of other debts and monthly payments

The bottom line

Overall, this fall looks promising for refinancing. “[But] it’s difficult to time the market and react to every Federal Reserve move,” Breeze highlights. Generally, industry experts encourage refinancing if you can secure a rate reduction of 0.5% to 1%.

If you’re thinking about a mortgage refi, Calixto recommends connecting with a home lender for a loan analysis now. This “helps identify your current interest rate and the rate needed to make refinancing worthwhile,” she says.