Control the Controllables If You’re Worried About Mortgage Rates

Control the Controllables If You’re Worried About Mortgage Rates

You’ve likely been hearing a lot about mortgage rates lately, and what you’re probably hoping for is news that they’re coming back down. If you’ve seen headlines about the Federal Reserve (The Fed) cutting the Federal Funds Rate in early November, you might be optimistic that mortgage rates will immediately follow. However, despite what some headlines suggest, the Fed’s actions don’t directly control mortgage rates.

The reality is that mortgage rates are influenced by a combination of factors, including the Fed, the job market, inflation, geopolitical events, and other economic variables. While the Fed’s recent actions lay the groundwork for mortgage rates to decrease over time, the process is likely to be gradual and may come with some bumps along the way.

Here’s the best advice for today’s market: while it’s tempting to wait for rates to drop, timing the market is incredibly difficult due to the many factors at play. Instead, focus on what you can control to set yourself up for success. Here’s what to prioritize to make the most of your homebuying journey.

Your Credit Score

Your credit score is a major factor in determining your mortgage rate, and even a small difference in points can have a noticeable impact on your monthly payment. As an article from Bankrate explains:

“Your credit score is one of the most important factors lenders consider when you apply for a mortgage. Not just to qualify for the loan itself, but for the conditions: Typically, the higher your score, the lower the interest rates and better terms you’ll qualify for.”

With today’s rates, having a good credit score is essential to securing the best possible mortgage rate. To check your current credit score and learn how to improve it, connect with a trusted loan officer.

Your Loan Type

There are various types of loans available, each offering unique terms for qualified buyers. As the Consumer Financial Protection Bureau (CFPB) explains:

“There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose. Talking to multiple lenders can help you better understand all of the options available to you.”

Collaborate with your team of real estate professionals to explore the loan options you may qualify for and determine which one aligns best with your financial needs.

Your Loan Term

Similar to loan types, you also have choices regarding the terms or length of your loan. As Freddie Mac explains:

“When choosing the right home loan for you, it’s important to consider the loan term, which is the length of time it will take you to repay your loan before you fully own your home. Your loan term will affect your interest rate, monthly payment, and the total amount of interest you will pay over the life of the loan.”

Lenders commonly provide mortgages with 15, 20, and 30-year terms, and the term you choose directly affects your interest rate. Consult with your lender to determine which option is best for your financial situation.

Bottom Line

Keep in mind that you can’t control broader economic trends or predict exactly when mortgage rates will drop. However, you can take steps now to set yourself up for success.

Let’s connect to discuss the actions you can take today to make a meaningful difference when you’re ready to make your move.