Welcome back to Mortgage Porter Weekly! This week we’re covering last week’s Fed and housing headlines, where mortgage rates stand, a packed economic calendar, and a spotlight on home equity lines of credit. Watch the video above, then read on for the details.

Recap From Last Week

Markets were volatile last week, with Fed comments and geopolitical headlines both in play.

Several Fed members suggested another rate hike may be needed to bring inflation toward the 2% target, and markets raised the odds of a hike at the October meeting. The Fed has two meetings left this year, October and December. Remember, the Fed Funds Rate is the overnight borrowing rate for banks, not a mortgage rate.

Comments from President Trump and Iran’s president at the U.N. added uncertainty around the conflict and negotiations, with markets watching oil prices.

In housing, new home sales rose 6.4% in August to an annualized pace of 684,000, and July was revised higher. The median new home price fell 5.8% from a year ago, but that doesn’t necessarily mean home values are falling — the median can shift with the mix of homes sold, and sales under $500,000 increased notably.

Locally, Northwest MLS home sales were down 7.6% from a year ago in August, while active listings jumped 22%. King County’s median sale price was $845,000, so buyers here have more choices and more room to negotiate.

Where Are Mortgage Rates Right Now?

Optimal Blue reports that the average 30-year fixed rate as of last Friday, September 25th, came in at 7.225%, continuing the trend higher.

A quick reminder: this index is an average drawn from about 35% of mortgage transactions — the lenders who use Optimal Blue. It’s not a rate quote, and you can’t lock last week’s rates today. Your credit score, loan-to-value, and other factors all affect what you may qualify for. This is simply here to give you a sense of which way rates are trending.

Economic Calendar

This week’s calendar is packed.

On Wednesday, we get the Fed’s favorite inflation gauge, the Personal Consumption Expenditures report, or PCE. The market expects August to come in between 0.3 and 0.4%.

We also have jobs data. ADP reports Wednesday, with markets expecting about 72,000 jobs added. Then the BLS Jobs Report comes out Friday, with expectations of about 84,000 jobs and unemployment holding steady. I’ll be watching for revisions to the previous report, which came in hot.

Looking ahead, the next Fed meeting is October 27th and 28th, and CME FedWatch currently shows 70% odds of a rate increase.

Mortgage-Backed Securities Update

It’s a tough day: MBS are down 53 basis points at the time I’m preparing this update. You can see how rough this month has been for mortgage rates.

Spotlight: Home Equity Lines of Credit

This week’s spotlight is home equity lines of credit, or HELOCs — a flexible way to tap the equity in your home. Rates can be variable, following prime, or fixed, and some are interest-only for a set period. Some replace your first mortgage, while others sit in second position and leave your existing first mortgage intact. How much you can qualify for depends on your credit score and your combined loan-to-value, and most lenders won’t place a HELOC behind two existing mortgages.

If you’ve been thinking about using your equity, or want a credit line in place for a “just in case” moment, let’s talk through your options.

Let’s Talk

If you have questions about your specific scenario — whether you’re buying, refinancing, considering a retirement mortgage, or just trying to figure out your options — I’d love to hear from you.

The Optimal Blue index reflects approximately 35% of mortgage transactions nationwide and is not a rate quote. Rates and programs are subject to change without notice.

Offer Less or Seller Credit to Buy Down the Interest Rate

Say you’re buying an $800,000 home with 20% down, and the seller agrees to the maximum concession for a conventional loan which is 6% of the price, or $48,000. Most buyers think of that as a flat $48K discount. But where that money goes changes what it actually does for you:

The example below uses illustrative rates to show how the two strategies compare — see full details below the table.

Same $48,000. The rate buydown delivers nearly 2.5x the monthly relief of applying it straight to price — because a price cut only nudges what you’re borrowing, while a buydown works directly on the number driving your payment.

To put it another way: getting $685/month in savings through price alone would take a seller agreeing to drop $125,000 off — a number almost no one agrees to. A 6% closing-cost concession gets you there instead, and sellers negotiate those far more comfortably than a six-figure price cut.

Where a price cut still wins: less cash needed at closing — roughly $23,000 less in this example. If a seller genuinely will go that low on price and you have the cash, that route is cheaper upfront. It’s just a much harder ask, which is exactly why the buydown tends to be the more realistic win at the negotiating table.

Don’t Leave Money on the Table

Here’s the part that trips buyers up: seller concessions only cover actual allowable closing costs. If you negotiate for more than you end up using, the unused portion typically doesn’t come back to you, and it cannot be applied towards your down payment; it goes back to the seller. That’s potentially losing real money simply because it wasn’t planned for correctly.

The fix is straightforward: work with your lender before you’re negotiating the offer, not after, so your agent requests a concession amount that’s actually usable and matched to current rates, your loan program, and what buying down your rate would really cost. I wrote more on exactly how these limits work by loan type (such as conventional, FHA, and VA) and down payment, in my post on How Much Can a Seller Pay Toward a Buyer’s Closing Costs?

Frequently Asked Questions

Is a seller-paid rate buydown better than a price reduction?
Often, yes — for the same dollar amount, a buydown typically delivers a bigger monthly payment reduction than an equivalent price cut, since it works directly on the rate rather than just shrinking the loan amount. The trade-off is cash to close: a genuine price reduction usually requires less cash upfront for a similar monthly result. Which is better depends on how much cash you have versus how much room the seller has to negotiate.

How much can a seller contribute toward my closing costs?
It depends on your loan type and down payment — conventional loans typically allow 3% to 9% depending on loan-to-value, FHA allows up to 6%, and VA allows up to 4%. I break this down in more detail in How Much Can a Seller Pay Toward a Buyer’s Closing Costs?

What happens if I negotiate more seller credit than I actually use?
Unused seller credit is typically not refunded to you — it goes back to the seller. This is exactly why it’s worth confirming the right amount with your lender before finalizing your offer, rather than guessing at a round number.

Should I choose a temporary buydown (like a 2-1) or a permanent buydown?
It comes down to how long you plan to stay in the home. A temporary buydown gives you a lower payment for the first year or two, then reverts to the full rate — a reasonable bet if you expect a refinance or income increase by then. A permanent buydown costs more upfront but the lower rate lasts the life of the loan, which tends to be the safer choice if you’re planning to stay long-term.

Should I just wait for rates to drop and refinance later instead of negotiating a buydown now?
It’s tempting, but “wait and refinance” comes with real uncertainty and nobody knows if or when rates will drop enough to make that refinance worthwhile, and a refinance carries its own closing costs on top of whatever you’re hoping to save. Negotiating a lower rate now, while you have the seller’s leverage on the table, locks in the benefit immediately. You’re not betting on a future you can’t control. If rates do eventually drop further, you can always look at refinancing then; but you get the lower payment starting on day one either way, instead of paying the higher rate now while you wait and hope.

Can I combine a seller-paid buydown with other down payment or closing cost assistance?
Sometimes, depending on your loan program and the specific assistance program’s rules. This is worth a direct conversation with your lender early on, since combining sources has its own set of limits.

Does asking for a rate buydown instead of a price reduction affect my offer’s competitiveness?
Not typically — from the seller’s side, it’s still a cost, so it factors into their decision the same way a price concession would. The advantage is on your end: it usually gets you more monthly relief per dollar negotiated.

*Mortgage rates posted are for example only to illustrate how a seller concession vs. price reduction can work. Example is based on a 30 year conventional mortgage. Mortgage rates subject to change (hopefully for the better) and credit approval. Visit this link for a current rate quote based on your personal scenario.
**Payment includes estimated property tax ($700/mo) and homeowners insurance ($165/mo); actual costs will vary by property and are confirmed during underwriting.

As widely expected, the Federal Reserve raised its benchmark Federal Funds Rate by 25 basis points last week making it the first rate hike in three years. This week’s update covers what that means for mortgage rates, where things stand heading into the next FOMC meeting, and a strategy worth considering if you’re buying or selling in today’s market.

Recap: The Fed’s First Hike in Three Years

The decision was unanimous, with the Fed pointing to elevated inflation as the key driver behind the move. Keep in mind, the Fed Funds Rate is the overnight rate banks charge each other — it’s not the same as your mortgage rate. Looking ahead, the Fed’s latest projections suggest another hike could be on the table before year-end: 16 of 18 officials are now projecting a higher Fed Funds Rate by December. In housing news, new construction cooled in August while builder confidence remained subdued, as higher mortgage rates, labor shortages, and elevated construction costs continue to weigh on builders. The resale market showed a bit more resilience and pending home sales rose 0.3% from July to August, though they remained 4.7% below year-ago levels. Even with mortgage rates higher, buyers are still moving forward; NAR Chief Economist Lawrence Yun noted that buyers were “steadily entering into contracts” last month. Elsewhere in the economy, retail sales jumped 1.2% in August, with 12 of 13 retail categories reporting gains. Initial unemployment claims remained relatively low at 196,000, while continuing claims stayed elevated at 1.73 million. It’s also worth noting that mortgage rates have continued trending higher since the start of the conflict in Iran, adding another layer of uncertainty to an already volatile rate environment.

Optimal Blue Mortgage Rate Index

The Optimal Blue index put the average 30-year fixed rate at 7.038% as of Friday, September 18th, the highest it’s been since May of 2024. A quick reminder on how to read this index: it reflects an average about 35% of mortgage transactions nationwide — it’s not a rate quote. You can’t lock in last week’s rate today, and your credit score, loan-to-value ratio, and other factors will all affect what you actually qualify for. This is simply meant to give you a sense of the direction rates are trending. Click here: If you would like to see current mortgage rates based on your personal scenario for your home located anywhere in Washington.

Economic Calendar

It’s a fairly light week on the economic calendar:

• Monday: No major economic news
• Tuesday: ADP Weekly
• Wednesday: Mortgage Applications
• Thursday: Jobless Claims, New Home Sales
• Friday: Durable Goods Orders

The next FOMC meeting is October 27–28, 2026, and CME’s FedWatch tool currently puts the odds at 55% for another 25 basis point increase.

Where Mortgage-Backed Securities Stand This Morning

As of late morning Pacific time, mortgage-backed securities were up a welcome 24 basis points. It’s been a rough month for mortgage rates overall, but movements like this are a reminder of how quickly things can shift day to day.

Weekly Spotlight: Seller Concessions Can Work in Your Favor

Higher mortgage rates don’t just affect buyers — they affect sellers too. And if you’re house hunting right now, that shift can actually put you in a stronger negotiating position. I’m not just talking about price reductions here — I’m talking about seller credit or concessions, especially ones that help buy down your interest rate. What you can request depends on your loan type, your down payment, and occupancy. But here’s something worth thinking through: compare a $20,000 price reduction to putting that same $20,000 toward a rate buydown instead. You may be surprised how much more you can save over time with the rate buydown compared to the price reduction. That’s why it’s so important to have a strategy in place before you make an offer — I’m always happy to run the numbers with you. If you’re the one selling right now, a seller-paid rate buydown can be a much stronger draw for buyers than a straight price reduction. It’s worth talking through with your real estate broker, or reach out to me directly and I’m happy to help you think it through.

Let’s Talk About Your Scenario

If you have questions about your specific situation — whether you’re buying, refinancing, exploring a retirement mortgage, or just want to talk through your options — I’d love to hear from you.

This content is for informational purposes only and does not constitute a rate quote or lending commitment. Rates and market data referenced above are subject to change.

What’s changing

For as long as most of us have been in the business, appraisers have used a handful of standard forms—the familiar Form 1004 for a single‑family home, a 1073 for condos, and so on. Those forms are being retired and replaced with one dynamic report, built on a new data standard called UAD 3.6, that adjusts based on the property being appraised.

• One report instead of many forms. The new Uniform Residential Appraisal Report (URAR) expands or contracts depending on your property type and the assignment.
• “Gross living area” is going away. Instead of one square‑footage number, the report breaks your home into four separate figures: Finished Area Above Grade, Finished Area Below Grade, Unfinished Area Above Grade, and Unfinished Area Below Grade—all measured to the ANSI Z765 standard. A finished basement now gets reported on its own line rather than folded into—or left out of—the main total.
• More detail on ADUs, outbuildings, and site features. Guest houses, solar panels, and other property‑specific details now have dedicated fields rather than being mentioned in passing.
• Updated condition and quality ratings. The C and Q ratings appraisers use have more specific definitions under the new standard.

What isn’t changing

This is a reporting overhaul, not a valuation overhaul. The appraiser’s independent opinion of value still works the same way—based on comparable sales and market analysis. Your appraisal contingency language doesn’t change, and if your appraisal comes in low, your options are exactly what they’ve always been: renegotiate, challenge the value through a Reconsideration of Value, bring cash to closing, or walk away if your contract allows it.

Which loans this affects

• Conventional loans (Fannie Mae/Freddie Mac): required for appraisals submitted on or after November 2, 2026.
• FHA: optional adoption has opened, but no mandatory date has been announced yet.
• VA and USDA: no adoption timeline announced as of this writing.
• Jumbo or portfolio loans: follow each investor’s own requirements—ask your loan officer if you’re in this category.

One detail that trips people up: the deadline is based on when the appraisal is submitted to Fannie/Freddie’s system, not your contract date or the appraisal’s effective date. A home appraised in late October but submitted in November still needs the new format.

What this means for your closing timeline

Appraisers are learning new software and entering more data per assignment this fall, so it’s reasonable to expect a short adjustment period. At the same time, the shift toward more digital tools and trained data collectors—especially in busy or rural markets—may actually help some appraisals move faster and keep closings on track. Either way, if you’re under contract with a closing date near November 2, it’s worth talking to your loan officer early about your appraisal timeline so there are no surprises.

A longer or unfamiliar‑looking report isn’t a red flag—it usually just reflects the property’s complexity and the new format, not a problem with the file.

A few things to have ready

• Know your real square footage breakdown. There’s no longer one headline number—expect four figures, measured to the ANSI Z765 standard, that may not match what’s on your MLS sheet or county record.
• If you have a finished basement, be ready to see it reported separately rather than combined into your total living area.
• If you have an ADU, addition, or outbuilding, have details on hand—permits, square footage, when it was built.
• Keep records of permits, upgrades, and additions—HVAC, roof, guest house, anything that’s changed. This feeds directly into the appraiser’s condition rating.
• Double‑check your listing details are accurate. Appraisers will check photos and public records against the new report’s more detailed fields.
• Don’t forget the basics. The usual pre‑appraisal safety checklist—CO detectors, water heater straps, working smoke alarms—still applies and can still hold up closing if missed.

Questions about how this affects your specific purchase or refinance timeline? I’m happy to walk you through what to expect. Let’s talk →

Frequently asked questions

Will this change what my home appraises for?

No. This changes how appraisal data is collected and reported, not how the appraiser develops their opinion of value.

Does this affect my FHA or VA loan?

Not yet. The November 2, 2026 mandate applies to conventional loans sold to Fannie Mae and Freddie Mac. FHA has opened optional adoption but hasn’t set a mandatory date, and VA and USDA haven’t announced timelines.

What if my appraisal is done before November 2 but submitted after?

It still needs to use the new format. The requirement is based on the submission date, not the appraisal’s effective date or your contract date.

Read: Appraisal Guide for Washington Homebuyers

What lenders are actually measuring: your debt‑to‑income ratio

Lenders use your debt‑to‑income ratio, or DTI, to see how much of your gross monthly income is already spoken for. There are two versions:

• Front‑end ratio — your proposed housing payment (principal, interest, taxes, insurance, and HOA dues if any) divided by gross monthly income.
• Back‑end ratio — that same housing payment plus all your other minimum monthly debt payments (credit cards, car loans, student loans, child support), divided by gross monthly income.

The back‑end ratio is the one that tends to catch buyers off guard, because it counts every recurring obligation and the proposed new mortgage payment. The back-end ratio also tends to be what carries more weight with lenders.

How much debt is too much?

There’s no single number that applies to everyone. Maximum DTI may vary depending on the loan program, your credit score, your down payment, and how much cash reserve you have left after closing. A strong credit score or a larger down payment can sometimes offset a higher DTI; a thin credit file may tighten it. This is exactly the kind of scenario where running the actual numbers with a mortgage professional matters more than a rule of thumb you read online.

Loan programs handle debt differently

Each mortgage program sets its own DTI guidelines, and some lenders layer their own overlays on top:

• Conventional loans generally allow up to 50% with strong compensating factors, such as high credit scores or significant cash reserves.
• FHA loans may allow higher DTI in some cases, with the trade‑off of mortgage insurance for the life of the loan in many scenarios. If the loan requires a manual underwrite, the DTI may be capped at 43%.
• VA loans use residual income as an additional qualifying factor alongside DTI, which can help some veterans and service members with higher debt loads.
• USDA loans tend to run tighter DTI limits but offer zero down payment in eligible rural and suburban areas.
• Non‑QM and portfolio loans may qualify borrowers using a different measure of income entirely, which can work around a DTI that’s holding up a conventional or government loan.

That last option is worth a closer look if a traditional DTI calculation isn’t telling the full story of your finances. Depending on the program, income can be qualified using bank statement deposits instead of tax returns, asset depletion in place of monthly income, or — for investment properties — the property’s own rental income through a DSCR or no‑ratio loan, bypassing your personal DTI altogether. These programs typically come with different rate and down payment trade‑offs than conventional or government loans, so they’re best discussed directly with a mortgage professional to see if one fits your situation.

Some debts may not need to be paid off

Not every debt on your credit report has to be eliminated to qualify. Depending on the loan program and how the numbers work out, some may not count against your debt‑to‑income ratio at all:

• Medical collections — many loan programs exclude medical collections from DTI calculations, or treat them differently than other collection accounts 
• Installment loans near payoff — a car loan, personal loan, or similar installment debt with a small number of payments remaining may be excluded from your DTI, since the obligation will end shortly after closing.

This is worth knowing before you assume a debt needs to be paid down. Sometimes the better move is leaving it alone and letting your loan officer document why it doesn’t count — rather than spending cash to eliminate something that wasn’t holding you back in the first place.

Should you pay off debt before buying?

Paying down a balance can lower your DTI and may improve your credit utilization, which can help your score. Where buyers get tripped up is assuming paying off and closing an account is the same thing. Closing a paid‑off card removes available credit and can shorten your average account age, which may work against your score right when you need it strongest.

If a debt does need to be paid off to qualify, it’s often better to do that at closing rather than earlier in the process. Paying it off ahead of time means your score has time to react — for better or worse — before your loan is priced and underwritten. Paying it off at closing instead avoids that swing, and it gives underwriting a clean paper trail showing the debt was satisfied as a condition of the loan, which is often exactly what’s required when a payoff is being used to meet a DTI requirement.

There’s also a cash trade‑off to think through. Money used to pay off debt is money that’s no longer available for your down payment. In some scenarios, using cash to pay off debt and reducing your down payment can actually help you qualify for more home than putting that same cash toward a larger down payment because it removes a monthly obligation from your DTI rather than just lowering your loan amount. Which approach works better depends on your specific numbers, so this is worth running both ways with your mortgage professional before deciding.

When the numbers don’t work yet: redefining “dream home”

If your debt load is limiting what you qualify for, it doesn’t necessarily mean waiting years to buy. It may mean adjusting what you’re buying first. A smaller home, one that needs some cosmetic work, or one a little further from the city center can mean a lower payment now and more breathing room in your budget while you pay down debt and build equity. Many buyers use that first home as a stepping stone, selling a few years later and rolling the equity into the home they originally wanted.

A simple game plan

1. Contact a local mortgage professional (I can help you with homes located in Washington state), to determine what your actual debt-to-income ratio is.
2. Identify which debts, if any, are worth paying down versus which are better left alone or excluded from DTI entirely.
3. Compare loan programs, since DTI treatment varies more than most buyers expect.
4. Create a realistic plan with your mortgage professional, whether that’s buying a home now or months from now.

Frequently asked questions

Can I buy a house if I have credit card debt?

In many cases, yes. Credit card debt on its own isn’t disqualifying — what matters is how it affects your debt‑to‑income ratio once your proposed mortgage payment is added in.

Does paying off debt always help me qualify for more house?

Usually it lowers your DTI, which may help. But if paying it off means closing the account, draining cash you needed for a down payment, or paying off something that wasn’t counted against you anyway, it can work against you. Run the numbers before deciding.

What counts toward my debt‑to‑income ratio?

Minimum monthly payments on credit cards, car loans, student loans, and other installment or revolving debt, plus your proposed housing payment. Living expenses like groceries or utilities are not included, and some debts — like certain medical collections or installment loans close to payoff — may not be counted either.

Should I pay off my car before buying a home?

Not necessarily. Paying off a car loan closes an established credit tradeline, which can lower your score, and it uses cash that may be needed for your down payment or reserves. Many loan programs won’t count an installment debt like a car payment toward your DTI once there are just a few payments left. Talk to your mortgage professional before making the call.

If you’re carrying debt and wondering where that puts you, let’s run your actual numbers — no pressure, no obligation.

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Rhonda Porter · Licensed Mortgage Advisor · NMLS #121324 · Washington State