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Home prices are falling. Here are 3 things buyers should do right now.

With home prices dropping, now is a great time for homebuyers to get pre-approved. Getty Images

Home buyers have had a rough time lately, thanks to decades-high inflation and correspondingly high interest rates meant to tame it. With mortgage rates hitting their highest point since 2000 last summer — and only slightly dropping since — buyers haven't had much good news lately. This week's report showing a slight uptick in the inflation rate was the latest blow, seemingly pushing off interest rate cuts to even later in the year.

That said, there was some good news this week: Home prices are falling. 14.6% of U.S. homes listed for sale in February had their price dropped, according to a new report. That's an increase from 13.2% from the year prior and the first annual rise since May. While home price drops are relative — they could fall in some markets and rise in others — the overall trend is a positive one for buyers otherwise coping with elevated mortgage rates. 

To truly take advantage, however, buyers should strategically position themselves and be prepared to act. Below, we'll break down three things buyers should do now that home prices are dropping.

Start by seeing what mortgage rate you could qualify for here now.

3 things buyers should do now that home prices are falling

Here are three smart moves homebuyers should make with home prices dropping.

Shop around for lenders

While today's average mortgage rate for a 30-year mortgage is 6.86%, it's just an average, meaning that some buyers will get approved for a higher rate and some will get approved for a lower one. It makes sense, then, to shop around to secure the latter type. 

Get rate estimates from at least three different lenders to determine which one is offering you the best deal and which one just appears to be. And compare closing costs and any fees to make sure that the lower rate isn't being compromised by those expenses. You'll want to do this soon so you know which lender to proceed with if you find a home priced lower than expected.

Start shopping for lenders here now.

Get pre-approved

A pre-approval shows sellers that you're a serious buyer — and that you have the financial standing to make a legitimate offer. By getting pre-approved now, you'll be better positioned to make that offer when you find a home priced right for your budget. Plus, pre-approvals last anywhere from 60 to 90 days, giving you some flexibility and extra time to find a home in your budget. 

And you don't need to use the lender you got the pre-approval from if you ultimately find a lender with better rates and terms. Still, a pre-approval now could be the difference between your offer being accepted or rejected.

Understand the local market

Location, location, location. It's vital to understand your local market and how the location of any prospective property will ultimately affect what you pay. While home prices are coming down overall, they may not be in your specific ZIP code. On the other hand, they could be coming down significantly where you want to live — or in the neighborhood next to it — giving you some leverage to buy at the right price. 

But you won't know which is which until you understand the local market. So do your homework, learn about the market, speak to real estate agents and more so that you're positioned to make a competitive but reasonably priced offer when you ultimately do find a home. 

Learn more about your current mortgage options online today.

The bottom line

With mortgage rates high but home prices dropping, buyers need to be smart about their next steps. By shopping around for lenders, getting pre-approved for a mortgage and thoroughly understanding their local market they will be better prepared to act — and more likely to have their offer accepted. But they should take these steps now because lower home prices will surely bring out more competition, potentially further complicating an already volatile real estate market. 

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