Buyers are always searching for a way to get a leg up in getting their offer accepted. This requires getting pre-approved for a loan prior to submitting an offer. If you are looking to secure a home loan, know these factors that affect mortgage rates and how this could impact your monthly payments.
When going after a mortgage, you want to be sure to lock in the best possible rate you can find. Like airline tickets, mortgage rates fluctuate throughout the week and even throughout each day, which is why it’s important to listen to your lender and lock on the day they tell you is best. Throughout each week and month, there are different news reports that come out which affect how rates move. So next time, if your lender warns you of an upcoming jobs report – it’s best to listen to their advice.
The phrase “the bigger the risk the bigger the reward” can also be applied to choosing the best day of the week to lock in a mortgage rate. Wednesdays have historically been the most volatile day of the week due to the influx of information released to the press from the Federal Reserve’s weekly market report. This has a drastic impact on mortgage rates, causing significant drops and spikes.
Remember this one thing, locking your rate in typically protects you the most. This is because historically rates jump up, but trickle down. Timing your lock to the “lowest rate” is similar to trying to time any market; it’s difficult and usually requires a hefty amount of luck.
As a general rule, the shorter the loan period, the lower your rate will be. Mortgage rates increase in increments of 0.125%, and although one percent may seem like an insignificant amount, a quick glance at the numbers would tell you otherwise. As a rough rule of thumb, every 1% increase in your interest rate lowers your purchase price you can afford for the same payment by about 10%.
Through the past few years, the US experienced historically low interest rates, causing a massive boom in the housing market. Rates have been on the rise since the 4th quarter of 2021 due to higher inflation in the economy. Interest rates for homes typically follow inflation. When it goes up, so do interest rates. When it comes down, that’s when home loan rates typically fall as well.
When it comes to securing the best rate possible, show your lender that you are a reliable borrower. The less risky you are as a borrower, the lower the interest rate you will likely be able to obtain. To get the best rate that you can, consider the following:
● High credit score: Having a favorable credit score will show you pay your bills back on time and manage your credit responsibly, and likely correlate with a lower rate.
● Larger down payment: The more ‘skin in the game’ you have, the less risk an investor assumes when buying your loan.
● Stable Income: A steady income, such as a salaried or full-time employment, demonstrates consistent revenue when applying for a mortgage loan and may help you get a lower rate.
At Spire Financial, our team of loan professionals can help you get the mortgage you need for your home purchase. We make it easy to apply and get pre-approved for a variety of different loans including FHA, VA, jumbo, and down payment assistance opportunities. Contact us today and learn how home ownership fits your financial goals.
Spire Financial (A Division of AmeriFirst Financial Inc.) brings lending expertise to you. All of our loan officers offer personalized communication for every client, guiding them through the process. We can show you ways to maximize your finances and unlock future opportunities. Spire Financial keeps you in control of refinancing, debt consolidation, and home equity. Together, we can achieve your financial goals.
V.I.P. Mortgage, Inc. DBA Spire Financial does Business in Accordance with Federal Fair Lending Laws. NMLS ID 145502. For state specific licensing, visit www.vipmtginc.com/national-licenses/. V.I.P. Mortgage, Inc. is not acting on behalf of or at the direction of the FHA/HUD or the Federal Government. This product or service has not been approved or endorsed by any governmental agency, and this offer is not being made by any agency of the government. V.I.P. Mortgage, Inc. is approved to participate in FHA programs but the products and services performed by V.I.P. Mortgage, Inc. are not coming directly from HUD or FHA. Information, rates, and programs are subject to change without notice. All products are subject to credit and property approval. Not all products are available in all states or for all loan amounts. Other restrictions may apply. This is not an offer to enter into an agreement. Not all customers will qualify.