Tips for Getting the Lowest Mortgage Rate

 This time last year the 30-year mortgage rates were just over 3%, but they are rising and now are over 5%. Professionals in the industry say that we will see more rate increases throughout the year. Here are some tips from the experts on how to make sure you get the best mortgage rates for your home.

1. Raise your credit score as much as possible

The higher your credit score, the lower your interest rate. LendingTree's data shows borrowers with credit scores of 760 or higher were offered an average APR that was 16 basis points lower than the average rate for borrowers with scores between 680 and 719. A basis point is equivalent to 0.01% and therefore one hundred basis points equals 1%.

Always know your credit score. Take a look at your credit report and make sure there are no errors. In order to raise your score, you should pay your bills on time and reduce your amount of debt. When you decide to get a mortgage, do not apply for too many new credit lines at the same time.

2. Get your finances in order

Your credit score is just one of the things a lender will take a look at. In order to make sure you are able to repay the loan, a lender will delve deep into your finances. Before they do this, you want to make sure you have the entire picture of your income and you will want to pay down any major debts.

To do this, you will need to know your debt-to-income ratio (DTI). Your DTI is the total of your monthly debt divided by your gross monthly income. A lender will want this figure to be 43% or less of your assets. Prepare a record of your steady income by collecting your pay stubs for a 30-day period as well as your W-2s from the past two years. If you are self-employed, you will also need to submit profit-and-loss statements along with your tax returns.

3. Save big for your down payment

You will want to make the largest down payment possible. The more you put down upfront the lower your interest rate. You will also want to make sure you put down at least 20% to avoid PMI. PMI stands for private mortgage insurance, which is around .05% to 1% of the loan amount.

4. Get quotes from 3-5 lenders

Shop around for the best deal. According to Greg McBridge, chief financial analyst at Bankrate, you should compare around three to five lenders to see who will offer you the best rate and other incentives.

“Be sure to look at closing costs, fees, points and tax credits. This can get a bit overwhelming, so if you have a financial planner, be sure to include them in the discussion,” says Jen Grant, certified financial planner at Perryman Financial Advisory.

“Gather all your rate quotes on the same day. Rates fluctuate daily and lenders should be able to give you their best rate out of the gate,” says Denny Ceizyk, senior staff writer at LendingTree.

5. Lock in the rate

This is important especially when rates are rising. Locking in your mortgage rate early on means your lender can’t raise your interest rate between the time you apply for a loan and the time you’re approved. That way, should the market fluctuate during the application process, you’ll be spared from paying higher interest rates if they go up.

6. Weigh the pros and cons of buying points

Discount points can be used to reduce interest rates. They are fees that you pay upfront to reduce your interest rate on your mortgage. One point usually costs around 1% of your mortgage amount. One point can lower the interest rate by one-eighth to one-quarter of a percent. “The lowest rates quoted often come with mortgage points, a minimum loan amount requirement or a certain amount of equity,” says Ceizyk.

7. Consider first-time buyer programs

First-time home buyer programs include aids such as down payment assistance, funds available for repairs and remodeling, no-interest second loans and reduced interest rates. These programs are used to lure first-time home buyers to certain areas. FHA loans, USDA loans and VA loans are common for home buyers with lower credit and smaller down payments.

8. Apply for a shorter loan term

Shorter term loans (such as a 15-year loan) can offer better rates than loan term loans (such as a 30-year loan. “Lenders price loans based on risk. If you can pay your loan off faster at a higher payment, lenders reward you with a lower payment because as your balance is paid down, there’s less risk you’ll default,” Ceizyk says.

If you are in the market for a new home, turn to a Realtor in your area. A Realtor can not only help you find the right home for the right price but can also lend a hand in finding the right mortgage lender.

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The Impact Current Mortgage Rates Have on Home Purchases

 

The is a relationship between mortgage rates and purchasing power. The lower the mortgage rate, the higher your purchase power. Rising mortgage rates will increase your monthly payments.

According to Freddie Mac, the average 30-year fixed mortgage rate is above 5%. Professionals in the industry are saying that they are more than likely going up. If you are thinking of purchasing a home, now is the time before your purchasing power is too impacted.

Your mortgage rate will determine how much your monthly payments will be which in turn shows how much home you can afford. For example, if your monthly mortgage payment is between $2,100 - $2,200 with the current mortgage rate, you would be able to purchase a home for over $400,000. If the mortgage rates were to increase to 5.75% you would be looking at a house between $360,000 to $380,000.

"Get preapproved with where rates are today, but also consider what would happen if rates were to go up, say another quarter of a point, . . . Know what that would do to your monthly costs and how comfortable you are with that, so that if rates do move higher, you already know how you need to adjust in response," says Danielle Hale, Chief Economist for realtor.com.

If you are ready to purchase, find a trusted Realtor and mortgage lender who can help you through the buying process. Remember, mortgage rates are predicted to be rising, which will impact your purchasing power.

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9th Time This Year for Record Low Mortgage Rates

 Freddie Mac announced another round of record-low mortgage rates. This will be the ninth record low since March 2020. The first full week of September saw a 2.86% drop in the average interest rate on a 30-year fixed-rate mortgage and a 2.37% drop on a 15-year fixed-rate.

“Mortgage rates have hit another record low due to a late-summer slowdown in the economic recovery,” said Sam Khater, Freddie Mac’s chief economist.

Home sales remain very strong according to Joel Kan, the Mortgage Bankers Association’s associate

vice president of economic industry and forecasting. Both the loan size and applications for new mortgages rose. For the week ending on September 4, applications were up 3% and the average loan size was the highest amount since the Mortgage Bankers Association began recording at $368,600.

“Homebuyers continue placing offers on homes, pushing existing inventory toward historic lows,” said George Ratiu, Realtor.com’s senior economist. “Would-be sellers are stuck in their homes, struggling to find their next house amid a dearth of supply, further contributing to the decline in inventory.”

The limited supply of homes for sale is driving the price higher. Home prices are 11% higher than they were a year ago. Homebuyers have to purchase less home at a higher price.

Refinancing for homeowners has also been on the rise. The record-low interest rates makes it more affordable for homeowners who would like to refinance.

Black Knight, a mortgage data company, says there are approximately 19.3 million high-quality refinance candidates. This number includes 43% of all 30-year mortgage holders, making this the largest group of this kind there has ever been.

Whether you are looking for your first home, a new home or refinancing your current home, now is the time. The mortgage rates are very low and FHFA also announced Fannie Mae and Freddie Mac will exempt refinance loans with balances under $125,000 from the fee. The housing market is the strongest we have seen in a long time and only proves to make a great investment for the future.

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Homebuyers Weekly Mortgage Demand on the Rise

According to the Mortgage Bankers Association, the total mortgage application volume rose 4.1% the week of July 13th from the week before. Homebuyer demand is hotter than ever, especially with the record low mortgage rates.

“Mortgage applications increased last week despite mixed results from the various rates tracked in MBA’s survey,” said Joel Kan, an economist for the trade group. “The average 30-year fixed-rate

mortgage rose slightly to 3.20%, but some creditworthy borrowers are being offered rates even below 3%.”

There was a small increase to 3.20% in the average contract interest rate for a 30-year fixed-rate mortgage with a conforming loan balance of $510,400 or less. For loans with a 20% down payment points (including the origination fee) went up from 0.33 to 0.35. The average on the 30-year fixed mortgage was 88 basis points higher than it was at the end of June.

This small jump encouraged homebuyers to act which increased the refinance application volume up 5% for the week and 122% from the same week a year ago. According to the seasonally adjusted index data “the refinance share of mortgage activity increased to 64.8% of total applications from 64.2% the previous week.”

Mortgage applications to purchase a home rose 2% the week of July 13th and were reported at 19% higher than this time last year. That marked the ninth straight week of annual gains. According to Fannie Mae chief economist Doug Duncan, close to 60% of all outstanding loan balances have around a half-percentage point incentive to refinance.

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The New Year Starts Off With Mortgage Rates Below Last Year’s Average

A new year has brought good news for the housing industry. The first week reported that the average U.S. fixed rate for a 30-year fixed mortgage averaged at a low 3.72%. The findings were 80 basis points below data reported a week earlier.

George Ratiu, Realtor.com’s chief economist said, “The conventional 30-year loan slid 2 basis points to 3.72% in the first week of 2020. Rates remain about 80 basis points lower than the first week of

2019.”

Ratiu predicts that employment and wage gains will fuel the housing industry. The economy will maintain a moderate growth trajectory this year.

The 15-year FRM also was at a low 3.16% which was down from this time last year’s reportings of 3.99%. The average rate dropped in just one week from 3.19% to 3.16%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage also averaged 3.46% which was lower than the 3.98% reported this time last year.

“As mortgage rates remain favorable, buyers are likely to get a head start on the spring shopping season in the first couple of months of this year,” Ratiu said. “A stronger infusion of new homes in affordable price ranges would be a welcome gift for the New Year.”

Sam Khater, Freddie Mac’s chief economist, believes the rates have maintained around 3.7% for the last couple of months because of ” the combination of improved economic data and market sentiment has led to stability in mortgage rates.”

“The low mortgage rate environment combined with the red-hot labor market is setting the stage for a continued rise in home sales and home prices,” said Sam Khater.

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