Mortgages are loans that allow you to borrow money against the value of your home. They’re an important financial commitment, and your interest rate plays a major role in how much you’ll pay each month throughout the life of the loan.
The best mortgage rates vary based on the loan type you’re seeking and other economic variables like demand for Treasury bills, inflation levels or unemployment levels. Therefore, it’s always wise to check with your lender first to see what rate they offer you; additionally, be prepared to speak with multiple lenders in order to find one with the lowest interest rate.
Your credit score, down payment amount and debt-to-income ratio all play a role in determining your mortgage rate. A higher credit score, larger down payment and lower DTI will lead to the lowest rates available.
According to Freddie Mac, getting quotes from multiple lenders can help you secure the lowest mortgage rate. On average, borrowers who obtain quotes from just one additional lender save an additional $1,500 over their loan’s duration.
Mortgage lenders calculate your rate based on the risk they believe you may take on. A higher credit score and larger down payment can help you qualify for the lowest available rates, but it’s essential to remember that these elements aren’t entirely within your control.
Does the Federal Reserve Determine Mortgage Rates?
No, the Fed doesn’t directly decide your mortgage rate; however, it does indirectly through its influence over money supply and prices for mortgage-backed securities (MBS). When they raise the federal funds rate, however, this causes market tightening which in turn results in lower mortgage rates for consumers.
When the Fed lowers the federal funds rate, it makes the market more accommodating which helps stimulate economic growth and provides consumers with lower mortgage rates. With less rigidity in place, now could be an ideal time to refinance your current mortgage or purchase a new home.
Maintaining an eye on your mortgage rates is critical for both homebuyers and homeowners. Low mortgage rates can help you pay off your loan faster, enabling you to afford the house of your dreams sooner.
Finding the best mortgage rates requires checking with multiple lenders and comparing their terms and fees. Your local bank and credit union are two good places to start, but you may also search online or contact a mortgage broker for rates from various lenders.
A mortgage calculator can assist you in estimating your total monthly and interest payments and costs, including interest, taxes and insurance. It will also show how the rate you get affects those payments, demonstrating how lower rates lead to savings over time.
Comparing mortgage rates is a breeze, so you can find the one that works best for your situation. Our rate comparison tool helps you locate the most competitive rates and lenders who will assist in closing your loan quickly and easily.