Mortgage rates vary from one lender to another, and you should always shop around before committing to a particular one. Mortgage rates vary depending on many factors, including your state, the number of lenders, and the demand for housing in your area. For example, higher mortgage rates mean higher costs for lenders and therefore, higher rates. In riskier areas, lenders may hike rates to offset the risk. Finally, the state of the economy plays a major role in mortgage rates, so keep these factors in mind. If rates are going down, this is a good time to purchase a home.
While mortgage rates can fluctuate from month to month, many factors influence their overall movement. Most lenders use the prime rate – a benchmark that closely follows the Federal Reserve’s federal funds rate – as a guide to mortgage rates. The 10-year Treasury bond yield is another useful benchmark. Increasing bond yields often indicates that mortgage rates are about to rise. This is important information because many people refinance or pay off their mortgages after 10 years.
Your credit score also plays a role in determining mortgage rates. A credit score of 620 or higher is necessary for most conventional loans. However, scores below 500 may be acceptable with some loans, such as those issued by the Federal Housing Administration. While a high score means you can get a lower mortgage rate, a lower down payment will help you qualify. Therefore, improving your credit score is a good way to save money on your mortgage.
The APR (Annual Percentage Rate) is another important factor when choosing a mortgage. While interest rates are a key factor, many lenders may charge fees that make the APR higher than the interest rate. Moreover, the APR can lead you to the wrong lender and a higher rate than you need to pay. So, when comparing mortgage rates, consider the costs and fees associated with your chosen loan. Once you understand these details, you can choose the best mortgage for your unique financial situation.
The Federal Reserve has two main tools to control mortgage rates. They can directly affect mortgage rates through the purchase of MBS (mortgage-backed securities), and indirectly through the federal funds rate, which is the rate at that banks borrow money overnight. The federal funds rate has been hovering between 0% and 0.25% since May 1994, which means that it is more than likely to rise a little further next week. The federal funds rate will be a big influence on mortgage rates, so a 0.25% hike will affect many of the other interest rates.
Rising mortgage rates have impacted the homebuying season. Fannie Mae conducts a survey every month to gauge consumer sentiment toward home buying. In March, the survey revealed that 73 percent of respondents said now is not the right time to buy a home. While interest rates have historically been low, they are expected to rise even higher throughout the year. So, it’s wise to apply for a mortgage early. It’s still possible to lock in competitive rates. Contact Liberty Lending today!