July 19, 2019
What should borrowers know about mortgage loan interest rate trends? Especially when those trends are pushing rates toward historic lows? It’s a very good idea to be aware of the forces that affect mortgage rates; understanding how they work is a step toward making a more informed purchase as a house hunter or first-time home buyer.
Interest Rate Trends Are Affected By The Economy
What is good for the economy is often bad for mortgage loan interest rates, and vice versa. You will see rates pushing higher when there is good economic news, and rates trend lower when there is bad economic news.
Except when they don’t.
The thing to remember about mortgage loan rates is that no single factor affects them; it’s a combination of things and sometimes interest rates behave paradoxically.
A great example-a July economic report simply known in some quarters as “The Philly Fed Survey” was released on the 18th, and was reported as being quite positive.
This would normally have a negative effect on mortgage rates. Not due to the report itself, but rather investor reaction to it. The report did affect the market, but not for long and the net result was a seemingly contradictory move in mortgage rates.
There are complicated reasons why this could have happened, but for the average consumer, the bottom line is that the rates did not behave “as expected” in the wake of good economic news.
Interest Rates Will Change
Mortgage rates for new purchase home loans and refinance loans are at the time of this writing well below the four percent range for FHA loans. But over time these rates will fluctuate yet again. The key is to decide how long you are willing to wait if you are on the fence about applying for a loan at the moment.
Yes, mortgage rates MIGHT go even lower. But how low are they now, and how much do you save applying now as opposed to two months ago? Four? Timing is the key but it is important not to lose sight of the fact that rates go up and down on a regular basis.
Waiting could pay off, but there is an equal risk of interest rates rising again based on headlines, announcements by the Fed, breaking economic news, investor panic, etc.
Interest Rates Advertised Aren’t Always Available To You
The mortgage loan rates you see displayed on websites aren’t necessarily the rates that will be offered to you, and this is because of credit score issues. The rates you see online assume ideal conditions including a well-qualified borrower. Your FICO scores will help the lender decide what rates to offer you.
If you are worried abut your credit scores in general ahead of applying for a home loan, you aren’t alone. And there is good advice on how to fix your own credit a year ahead of your mortgage loan application.
It really is best to start working on credit as early as possible for best results, and the interest rate you are offered with a lower credit score will definitely help you save money over the lifetime of the mortgage. The effort is worth it.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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