Lower mortgage rates can improve borrowing costs, but they do not automatically make a home purchase or refinance the right move. In this True Pod conversation, Abdel Khawatmi of Got Mortgages joins Jonathan Hernandez and the team to connect rate movements with buyer competition, tax-return preparation and the cash needed to close. Their most useful message is about readiness: understand the payment you can carry, document the income a lender can use and compare complete financing options rather than waiting for a perfect headline rate. The rate discussion reflects the episode’s historical market setting, not a current mortgage quote.
Conversation originally published August 8, 2024. Recap added October 24, 2026.
Watch the original conversation on YouTube.
Key Takeaways: Readiness Matters More Than a Rate Prediction
The conversation starts with falling rates but quickly becomes a discussion of what actually makes a transaction work. A lower rate can reduce financing costs while encouraging more buyers to compete for the same homes. For existing owners, it can create a refinancing opportunity, but fees, the new loan term and the expected holding period determine whether that opportunity is worthwhile.
Three preparation tasks stand out. Self-employed buyers need accurate, usable income documentation. Owners keeping an existing home as a rental need a lender’s analysis of rental income and reserves. Every buyer needs a complete cash-to-close estimate, not just a down-payment figure. These details can matter more to a successful closing than a small difference between advertised rates.
The speakers favor taking informed action rather than remaining permanently on the sidelines. A sound application of that message is to become ready to buy, not obligated to buy. A completed financial review gives you the ability to act when the property, price and payment fit.
Why Mortgage Rates Can Move Before a Federal Reserve Decision
Abdel connects the rate environment to inflation and expectations about Federal Reserve policy. The useful distinction is between reacting to a headline and understanding why financing conditions are changing. The useful distinction is between reacting to a headline and understanding why financing conditions are changing.
Mortgage rates do not move mechanically with the Fed’s policy rate. Longer-term bond yields, inflation expectations, mortgage-backed securities pricing and lender pricing all influence mortgage offers. Markets can anticipate a policy change before it happens, so a borrower waiting for an official announcement may find that some expected improvement has already been reflected in available rates.
The episode also includes confident predictions about future cuts and election-related movements. Those are not a dependable transaction timetable. For planning purposes, separate what you can obtain today from what might become available later. A buyer should be able to carry the original payment without a promised refinance, and a homeowner should evaluate an actual refinance proposal rather than a forecast.
Buying Now Versus Waiting: Compare Competition as Well as Payments
One of Abdel’s central concerns is that lower rates could bring buyers back faster than available housing expands, particularly in the supply-constrained markets he discusses in New Jersey. He also observes that lower borrowing costs may persuade some owners to sell after holding on to inexpensive existing mortgages. Both demand and supply can respond; neither response is guaranteed to dominate.
Life changes continue to generate transactions regardless of rates. The conversation points to marriage, children, divorce and downsizing as reasons people move even when financing is less attractive. That helps explain why waiting for a supposedly ideal market does not necessarily eliminate competition or produce a better selection of homes.
A useful comparison is therefore not simply today’s rate against a hoped-for future rate. Ask your agent about competing offers, recent price reductions and available homes in your specific price range. Then ask your lender to compare the payment on a realistic purchase now with a scenario involving a different price and rate later. Treat the second scenario as a sensitivity test, not a prediction. Buying only works if the current transaction is affordable and the home suits your expected needs.
Refinancing: Separate Payment Savings From Cash-Out Borrowing
The speakers distinguish, in practice, between owners seeking a lower payment and owners accessing equity. These are different decisions. A rate-and-term refinance changes the financing of the existing balance. A cash-out refinance increases borrowing to release equity and may replace a low-rate mortgage with a higher-rate one.
For a payment-reduction refinance, compare the new payment and closing costs against the existing mortgage. The speaker notes that a rate-and-term refinance can significantly lower monthly obligations without necessarily taking cash out. Also compare the remaining life of the existing loan with the new term: restarting a long repayment schedule can lower the payment without reducing total interest expense.
For cash-out borrowing, the episode emphasizes that mortgage debt may carry a lower rate than unsecured debt. The fuller analysis must include the cost of repricing the existing mortgage balance, not just the money withdrawn. Compare available alternatives, including a separate home-equity loan or line of credit where appropriate. For cash-out borrowing, the speakers distinguish between owners seeking a lower payment and owners accessing equity. A cash-out refinance increases borrowing to release equity, which requires a careful analysis of the cost of repricing the entire mortgage balance.
Move-In-Ready Homes: A Higher Price Can Solve a Cash Problem
Jonathan describes a selling challenge familiar to owners of homes needing updates: prospective buyers may accept the general price range but lack the cash or appetite for renovations after closing. The discussion contrasts paying for repairs immediately with financing a more expensive, already-improved property.
That distinction matters because purchase price and immediate cash needs are not interchangeable. A buyer may qualify for the payment on a higher-priced home while struggling to fund contractors, temporary housing and unexpected repairs on a cheaper one. Conversely, a buyer with renovation experience and sufficient liquidity may find a property needing work more suitable.
For sellers, the practical lesson is to use repeated buyer feedback rather than assume every renovation pays for itself. Compare a realistic as-is sale with the expected net proceeds after improvements, carrying costs and selling expenses. For buyers, inspect the quality and permitted status of completed work. Cosmetic updates are not a substitute for evaluating the roof, systems and structure, and a future refinance should not be the justification for stretching beyond a comfortable payment.
Self-Employed Buyers: Coordinate Taxes and Mortgage Planning Early
Jonathan’s clearest recommendation is to report income accurately rather than conceal earnings while expecting a lender to approve a large mortgage. Abdel adds that mortgage planning often begins too late, after returns have already been prepared or a buyer is under contract. The stronger approach is to let the tax professional and lender address their different responsibilities before deadlines become urgent.
Gross business receipts are not the same as qualifying income. A lender evaluates the applicable tax returns, business history, income trends and other required documentation. Some noncash expenses, including eligible depreciation, may be added back in the lender’s calculation. That does not mean every business deduction can be reversed or that depreciation should be counted twice. Ask for a documented income analysis rather than relying on a rough estimate of annual sales.
The episode also raises IRS installment agreements and transcript availability. A lender evaluates applicable tax returns and business history to determine qualifying income. The episode emphasizes that mortgage planning should begin early to ensure the necessary IRS records and tax transcripts are available for a documented income analysis.
Keeping a Home as a Rental Requires More Than Finding a Tenant
The discussion explores a familiar route to owning multiple properties: move into a new primary residence while retaining an earlier home as a rental. The important underwriting question is how much eligible rental income can offset the existing property’s obligations. A lease by itself does not necessarily make the mortgage disappear from the lender’s calculation.
Abdel distinguishes between analyzing established rental activity on tax returns and evaluating rental income through other permitted documentation. Depending on the program and circumstances, the lender may use a Schedule E analysis or an allowed portion of documented rent. The resulting calculation can produce qualifying income or a loss. Taxes, insurance, association charges and financing expenses still matter.
Reserves are a separate hurdle. The speakers emphasize that owning several financed properties can increase the assets a lender requires after closing. Get a written reserve calculation before assuming the next purchase is feasible. Likewise, moving after a year does not automatically entitle someone to another low-down-payment primary-residence loan. Occupancy intent must be genuine, and approval depends on the property, program and borrower’s full financial position.
Compare the Whole Loan and the Professionals Delivering It
Another recurring theme is that the lowest quoted rate may not produce the best overall transaction. Abdel discusses the relationship between down payment, applicable loan limits, reserve requirements and available financing. Conforming limits vary by year, location and property unit count; a high purchase price alone does not determine whether the loan must be jumbo. Jumbo loans also are not universally more expensive.
Compare written Loan Estimates using the same purchase assumptions. Review the rate, points, mortgage insurance, lender charges, estimated taxes and insurance, cash to close and required reserves. Distinguish money spent on transaction costs from assets that must remain available afterward. For higher-priced properties, have the closing professional confirm applicable transfer-related taxes and contractual responsibility rather than relying on a remembered threshold.
The buyer-agency discussion adds another cost and service question: what work will the agent perform, what compensation is agreed to and who is responsible for it? Compensation is negotiable, and obligations come from the applicable agreement and rules. Ask about showing coverage, pricing advice, negotiation and transaction management. Select professionals for relevant execution and clear explanations, not follower counts or promises of unusually easy approval.
Equity Can Support the Next Move, but It Is Not Free Money
Jonathan presents real estate equity as a potential bridge from an initial purchase to later opportunities. Principal repayment and appreciation can help create proceeds for another down payment. However, a down payment becomes invested capital, not a protected savings balance. Sale proceeds depend on the eventual price, remaining debt, selling expenses and any applicable taxes.
The episode also discusses borrowing against equity. Loan proceeds generally are not taxable income because they must be repaid, but they create repayment obligations and reduce remaining equity. Whether the money funds another property, business equipment or debt consolidation, test the plan against vacancy, repairs, reduced income and financing costs. A property can increase in value while its owner still experiences a cash-flow shortage.
Tax planning needs equally careful separation. Tax planning needs careful attention. Selling a home and buying another does not automatically result in a tax-free transaction. Consult a tax professional to evaluate proceeds and potential obligations before committing to a sale or refinance. Depreciation and interest deductions also depend on property use and other rules. Coordinate before selling, refinancing or committing proceeds, when there is still time to structure a lawful transaction.
Final Checklist: Become Ready Before You Chase the Next Rate Drop
Set your payment ceiling first. Include principal, interest, property taxes, insurance, association charges and mortgage insurance where applicable, then leave room for maintenance and savings. Confirm that the purchase works without assumed appreciation, rent increases or a future refinance.
Build the documentation file next. Review income, tax filings, transcript availability, existing debts and any tax payment arrangement with the appropriate professionals. If retaining a rental, obtain the lender’s rental-income calculation and reserve requirement before committing your available cash elsewhere.
Compare complete written options. For a purchase, review cash to close, reserves, agent compensation and property condition alongside the rate. For a refinance, review costs, break-even, the new balance and total repayment period. Finally, agree on responsibilities and deadlines with your lender, agent, tax professional and closing team. Preparation creates choices; a prediction about rates does not.
Frequently asked questions
Should I wait for a Federal Reserve cut before shopping for a mortgage?
Not necessarily. Mortgage pricing can reflect expected policy changes before an announced cut. Get a current quote and preapproval analysis, then decide based on the payment, property options and your timeline rather than the announcement alone.
How can lower rates make a home search more competitive?
Lower financing costs can bring previously sidelined buyers back into the market. If listings do not increase enough, more buyers may compete for the same homes. Ask your agent for neighborhood-level evidence, including competing offers and available inventory.
What should I ask for before accepting a refinance offer?
Request the new rate, APR, monthly payment, loan term, closing costs, points and resulting loan balance. Compare the costs with expected savings over the time you expect to keep the loan, and check whether a longer repayment period explains part of the payment reduction.
Can depreciation help a self-employed buyer qualify for a mortgage?
Eligible depreciation may be added back when a lender analyzes business income under the applicable program. The lender must identify the deduction and apply the correct calculation. It is not permission to add back every expense or count the same income twice.
Can I get a mortgage while paying the IRS through an installment agreement?
It may be possible. The lender will evaluate the program’s requirements, agreement documentation, payment history, monthly obligation and any tax lien. Disclose the arrangement early so it can be incorporated into qualification and closing planning.
Will renting out my current house remove its payment from my debt calculation?
Not automatically. The lender determines eligible rent using the required documentation and compares it with the property’s obligations. That analysis can offset some or all of the expense, produce additional qualifying income or leave a qualifying loss.
Are mortgage reserves the same as closing costs?
No. Closing costs are transaction expenses, while reserves are qualifying assets that generally must remain available after closing. Requirements vary by loan program, lender and property portfolio. Ask for both the cash-to-close estimate and the separate reserve requirement.
Does selling my home and buying another home automatically avoid capital gains tax?
No. A qualifying primary-home sale may receive an exclusion under its own rules, while a Section 1031 exchange generally applies to qualifying investment or business real property. Buying another personal home is not, by itself, a tax-deferral strategy.
To talk with PRMG Got Mortgages, call 973-536-0276, visit GotMortgages.com, contact the team or build your mortgage plan.
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Author: Abdel Khawatmi with PRMG Got Mortgages | 973-536-0276
This article is general mortgage information only. It is not a commitment to lend, a rate quote, or legal or tax advice. Loan approval, terms and pricing depend on a full application, credit review and property details, and market conditions change. Talk with a licensed loan officer and your own legal or tax professional about your situation. NMLS #1712023 | PRMG NMLS #75243.