There are many things to consider when borrowing money to purchase a home. One of them is the interest rate, which determines the amount you pay your lender (ideally us) for the use of its funds.
The rate on your home loan is not set in stone until you lock it during the homebuying process and finalize it when you sign your closing documents. The specific rate you’ll end up getting is based on these and other factors:
- Your credit score. The higher your score, the lower the rate you may qualify for.
- The amount of your down payment. Similar to your credit score, the larger your down payment, the lower the rate you may qualify for.
- Your specific loan program. For example, if the home you wish to purchase is priced higher than conforming loan limits, you’ll need a jumbo loan, which may have a higher interest rate.
- Rate of inflation. In general, when inflation rises, so do mortgage rates, and vice versa.
- Prices of stocks, bonds, and consumer goods. Yields on treasury bonds and the consumer price index in particular have a significant effect on mortgage rates.
- Employment, earnings, and housing market data. All of it is tied into inflation and reflects on the general strength of the economy.
With all of that established:
What are some important things to keep in mind about mortgage rates?
- They fluctuate daily and sometimes hourly, primarily with the bond market. In this respect, they’re more similar to stock prices than the Federal Reserve funds rate – the amount banks pay to borrow money from each other overnight – which only adjusts after one of the Fed’s eight regularly scheduled meetings each year.
- Keep in touch with us and have a plan in place so you can get a competitive rate when you want or need to buy a home. It’s virtually impossible to time the market and always lock a rock-bottom rate, but if you have your ducks in a row, you can seize the opportunity to lock on a day when rates drop to a level you’re comfortable with.
- You can always refinance your loan later if rates drop enough to be a financial benefit for you. That’s what those of us in the mortgage industry mean when we say “marry the home and date the rate.” There may be an opportunity to improve on the terms of your mortgage in the future, but there may not be another opportunity to own the exact home you want anytime soon. You may also get rate relief at the beginning of your mortgage with a Temporary Buydown.
As you can see, the interest rate aspect of a mortgage can be variable and fluid. At Homeowners Financial Group, we take a consultative approach to home financing so you can make informed decisions about what’s best for you and your family ay any given time.
Contact a Homeowners Licensed Mortgage Professional today for sound advice about interest rates and everything else associated with home loans. We’re here to help!