July 24, 2020
The year 2020 has brought some incredible activity on mortgage loan interest rates; at the time of this writing FHA loan interest rates remain below three percent–in the final days of July we saw mortgage rates fall to a low of (best execution) 2.38%. That rate was reported on Thursday, July 24 2020.
Lower rates have prompted many to consider refinancing, but there are plenty of first-time home buyers hoping to be offered a lower rate in the current circumstances.
Buying a home can be tougher during coronavirus containment measures (lockdowns, social distancing, etc.) but for those with access to the lower rates, it pays to be safe but persistent.
Multiple Factors Responsible For Lower Rates
Mortgage rates have dropped and stayed low due to a variety of factors including COVID-19, but earlier in the year downward pressure was on mortgage rates due to trade war concerns as well as the later pandemic. The Fed’s moves on rate policy this year did not directly change mortgage rates, but investor reaction to the Fed’s announcements do affect rates.
There are mixed signals from some in the industry about home loan interest rates, refinance loan rates and home equity loan interest rates. Where will rates go next?
Some believe it’s almost ridiculous to expect them to fall even lower, while others feel we haven’t seen the end of the ups and downs of mortgage rates.
In any case, it’s important to recognize the opportunity associated with lower-than-low rates while accepting that if your timing is off, it’s not the end of the world.
In other words, if you have been offered a mortgage loan interest rate by your lender and you are happy with that rate, it may be best in the current environment to simply take the offer you like and don’t look back.
Locking And Floating
Some are tempted to float–which means delaying the agreement over an interest rate in hopes rates will fall even lower. Floating might seem like a good idea, but consider the fact that the 52-week average for these FHA mortgage loan interest rates is at 4%.
Does floating or delaying your mortgage rate lock commitment with the lender sound safe to do right now given that the numbers are already at all-time lows? That two percent range is one we might not see again for a long time. Or it may persist depending on circumstances. There’s no way to accurately predict what will happen.
Work On Your Credit Early
There are always risks to locking or floating your interest rate on the mortgage. Making a calculated and informed risk is the most important issue if you choose to float.
But you also have some control over the rates yo are offered–if you come to the home loan process with good credit the rate you are offered will be more competitive.
Get a better rate offer by working on your credit early (a year or better in advance of the loan), subscribing to credit monitoring services to make sure you don’t have credit issues brewing that you are unaware of, and commit to paying on time, every time for all financial obligations.
Do these things in the year leading up to your loan application for best results–it doesn’t pay to be in a hurry to get a home loan.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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