The average 30-year loan jumped from 5.23% to 5.78% two weeks ago. According to Freddie Mac, this was the most significant one-week surge in over three decades. So should you pause your home search?
We have had nearly two years of record-low mortgage rates, and it feels shocking to see interest rates rising above 6%. But, in historical context, rates are still low!
You can review the history of mortgage rates with this article by Mclean Mortgage:
So rates are still low historically, but are rising. What does this mean for buyers?
You may be tempted to wait for a better time to buy a home. But the longer you wait, the more likely you will end up spending more than you planned.
According to Mortgage Bankers Association, home prices are still expected to rise, allowing homebuyers who purchase now to still gain equity each year. In addition, homeowners who buy today will benefit from a growing economy and rising wages, allowing them to put more money toward their monthly mortgage payments.
Even though mortgage rates are heavily influenced by economic factors that are out of your control, there are some things you can do to help ensure you get the best rate:
- Submit for a Preapproval. The sooner you begin the process, the better your chance of a lower rate. You can also weigh options such as the down payment amount, purchase location, or special loan programs.
- Consider Fixed vs. Adjustable Rates. You may get a lower introductory rate with an adjustable-rate mortgage, which despite the added risk, can be good if you plan to move before the intro period ends.
- Look at Your Finances. The stronger your financial situation, the lower your mortgage rate could be. Looking for ways to boost your credit score or saving for a higher down payment also helps.
- Discount Points. Based on the time spent in your home, paying points towards the rates may make sense. The upfront cost can, over time, help you save money on interest paid and lower your monthly payment.
- Lock & Shop or Float Down Options. If you are considering buying a home in the next 30-60 days, you have the opportunity to lock a rate upfront while looking for a property.
- Typically, you must have a ratified contract to lock in a rate, but there are special programs that allow for shopping. In addition, once you lock in a rate, lenders can also provide float-down options if the market changes before your closing date.
But most importantly, choose the right lender. Working with a local mortgage lender is just as important as finding a local Realtor. Each lender charges different mortgage rates. Picking the right one for your financial situation will help you land a reasonable rate. Also, working with a local lender with experience will help you stay ahead of the game!