Mortgage Preparation: Is Now the Right Time to Buy?

Buying a home is one of the most significant financial decisions you’ll ever make, and timing plays a crucial role in determining whether it’s the right move for you. Before applying for a mortgage, it’s essential to evaluate economic conditions, mortgage rate trends, and your own financial readiness. Mortgage preparation is key to finding your dream home without breaking the bank.

In this blog, we’ll dive into the key factors influencing mortgage rates, with a particular focus on the Central Valley of California. We’ll also guide you through how to assess your financial preparedness to ensure you’re ready to take the plunge into homeownership.

Economic Conditions and Mortgage Rates

Mortgage rates don’t exist in a vacuum—they are shaped by broader economic trends. Understanding these factors can help you decide if now is the right time to buy.

1. Inflation Rates

Inflation directly impacts mortgage rates. When inflation is high, the purchasing power of the dollar decreases, which often leads to higher interest rates. Lenders increase rates to offset the reduced value of future mortgage payments.

Key Stat: In 2022, inflation peaked at 9.1%, contributing to the highest mortgage rates seen in over a decade. By contrast, lower inflation often aligns with more favorable mortgage rates.

2. Federal Reserve Policies

The Federal Reserve doesn’t set mortgage rates, but its monetary policies heavily influence them. When the Fed raises the federal funds rate to combat inflation, borrowing costs for lenders increase, and those costs are passed on to homebuyers.

For instance, as of early 2025, the Federal Reserve’s approach to managing inflation has kept rates hovering between 6% and 7%. Buyers should pay attention to Fed announcements for insights into rate trends.

3. Economic Growth and Employment

A strong economy with low unemployment often results in higher mortgage rates. Conversely, during periods of economic slowdown or recession, rates tend to decrease to stimulate borrowing.

Central Valley Focus: The Central Valley’s economy is heavily tied to agriculture and logistics. Local job growth and economic stability in these sectors can influence housing demand and mortgage rates in the region.

4. Housing Market Conditions

High demand for housing drives home prices up, which can impact affordability. In the Central Valley, cities like Fresno and Modesto have seen rising demand due to their relatively lower home prices compared to the Bay Area. However, as inventory remains limited, potential buyers may face higher costs despite stable or falling mortgage rates.

Are You Financially Prepared to Buy a Home?

Even with favorable mortgage rates, purchasing a home requires careful financial preparation. Here are the steps to assess your readiness:

1. Review Your Credit Score

Your credit score significantly affects your ability to qualify for a mortgage and the interest rate you’ll receive. Most lenders require a minimum score of 620 for conventional loans, but FHA loans may allow scores as low as 580.

Pro Tip: Check your credit report for errors and pay down high-interest debt to improve your score before applying.

2. Calculate Your Debt-to-Income Ratio (DTI)

Your DTI measures how much of your income goes toward debt payments. Lenders typically prefer a DTI below 43%, although lower ratios are viewed more favorably.

Example: If your monthly debt payments total $2,000 and your monthly income is $6,000, your DTI is 33%.

3. Save for a Down Payment

A 20% down payment is ideal to avoid private mortgage insurance (PMI), but many programs allow for lower amounts. For FHA loans, you may qualify with as little as 3.5% down.

Central Valley Focus: In markets like Fresno, where the median home price is around $390,000, a 3.5% down payment would amount to approximately $13,650.

4. Consider Closing Costs

In addition to your down payment, you’ll need to budget for closing costs, which typically range from 2% to 5% of the home’s purchase price.

5. Build an Emergency Fund

Owning a home comes with unexpected expenses, from repairs to property taxes. Make sure you have an emergency fund that covers at least three to six months of living expenses.

When Might Now Be the Right Time to Buy?

While mortgage rates and market conditions play a role, the decision to buy ultimately depends on your personal circumstances. Here are some scenarios where now might be the right time:

You’re Financially Stable: You’ve saved for a down payment, have a low DTI, and a solid credit score.
Rates Are Favorable: Even if rates are higher than historical lows, locking in a fixed-rate mortgage can provide long-term stability.
You’re Ready for Commitment: Homeownership requires a long-term commitment, both financially and emotionally.

Tips for Navigating the Central Valley Housing Market

Partner with a Local Real Estate Agent: Agents familiar with Central Valley neighborhoods can help you find homes within your budget and desired location.
Stay Flexible: Be prepared to act quickly in competitive markets like Fresno or Bakersfield, where inventory may be limited.
Work with a Trusted Lender: A reputable lender like Buwalda Mortgage can guide you through the mortgage preparation process and help you secure the best possible rate.

Deciding whether now is the right time to buy a home requires a careful evaluation of both external factors, such as mortgage rates and economic conditions, and your personal financial readiness. Mortgage preparation starts with understanding the current mortgage climate.

If you’re considering homeownership in the Central Valley or anywhere in the U.S., take the time to prepare and educate yourself. Understanding the factors influencing mortgage rates and assessing your financial situation can help you make a confident, informed decision.

Ready to start your homeownership journey? Contact Buwalda Mortgage today for expert guidance on mortgage preparation and securing the right loan for your needs.