Understanding Mortgage Rates and What You Can Control

You’ve probably been hearing a lot about mortgage rates lately, hoping for some good news that they’re on their way down. If you caught the headlines about the Federal Reserve’s recent early November Federal Funds Rate cut, you might have felt optimistic that mortgage rates would drop immediately. However, it’s important to know that the Fed’s actions alone don’t dictate mortgage rates.

Mortgage rates are influenced by a mix of factors, including the Fed, the job market, inflation, geopolitical changes, and more. While the Fed’s recent decisions may help rates decrease over time, the process will likely be gradual and could be unpredictable.

Should You Wait for Lower Rates?

It’s tempting to wait for rates to fall before making a move, but timing the market is nearly impossible due to the many variables involved. Instead, focus on what you can control to prepare for a successful homebuying experience.

Here are three key areas to prioritize:

1. Your Credit Score

Your credit score plays a significant role in the mortgage rate you qualify for. Even a small improvement in your score can lower your interest rate and monthly payments.

As 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.”

Take steps to strengthen your credit score and consult a trusted loan officer to understand where you stand and how to improve.

2. Your Loan Type

The type of loan you choose affects the terms and rates available to you. Conventional, FHA, USDA, and VA loans each have different eligibility requirements and interest rates.

According to the Consumer Financial Protection Bureau (CFPB):
“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.”

Work with your real estate and lending team to explore your options and identify the loan type that best fits your financial situation.

3. Your Loan Term

Loan terms, or the length of your mortgage, also impact your rate and overall costs.

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.”

Common options include fixed rate15-, 20-, and 30-year terms along with ARM options. Discuss with your lender which term works best for your goals and budget.

The Bottom Line

While you can’t control the broader economy or predict exactly when mortgage rates will drop, you can take actionable steps to position yourself for success.

Connect with me and I can help you connect with multiple lenders today to create a plan that works for you. By focusing on your credit score, loan options, and loan term, you can confidently navigate the current market and move closer to achieving your homeownership goals.