October 5, 2022
Many potential borrowers wonder why mortgage loan interest rates are rising? While it may be true that FHA rates may be lower than some conventional mortgage loans, in a rising mortgage rate environment even government-backed mortgages will see rate increases.
Why do rates go up in terms of overall cause-and-effect? Mortgage loan interest rates can rise for a number of reasons including changes in market conditions, investor reaction to those changes, breaking news at home and abroad, and government financial policy changes. All of these can directly or indirectly affect rates.
At the end of September 2022, there was an increase in interest rates bringing them to the highest levels some have seen in years.
The cause of these recent increases? You can thank an increase in the Federal Funds Interest Rate ordered by the Federal Reserve as part of an inflation control plan. Keep in mind that the Fed does NOT set mortgage rates, but setting the federal funds rate higher has an indirect effect on mortgage rates.
When banks have to pay more to lend money, it gets more expensive to borrow it.
In today’s rising mortgage rate environment, it is very important to shop around for a lender. You should also try to begin the mortgage application process with a solid record of on-time payments for all financial obligations in the last 12 months or more.
You have to give yourself enough time for these efforts to work but such preparations can make you a better candidate for FHA home loan approval.
Did you know that a lender will offer a mortgage loan interest rate based in part on FICO scores? Your credit scores definitely have an impact on what your lender is willing to offer. The more financially prepared you are to apply for the loan, the more you could save in terms of interest rates.
Do you struggle to get ready for a home loan? If you need help or advice ahead of your home loan application you do have a resource that can help.
Call the FHA directly at 1-800 CALL FHA, and ask for a referral to a local, HUD-approved housing counselor. These counselors offer information and advice on how to get ready for your loan.
Rising interest rates can mean a more expensive loan. Some choose to wait and see if the rates decrease over time but others don’t have the luxury of waiting.
For any number of reasons, they have to purchase soon. But remember that if you buy when rates are high, you still have the option to refinance later when there is a more favorable interest rate environment.
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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