FHA Loan Interest Rate Tips

July 9, 2019

Interest rates in recent months have moved to lows that have prompted many to consider refinancing their real estate and taking advantage of the lower rates while they last. But what should home buyers, especially first-time home buyers, know about the nature of mortgage rates in general?

There are a variety of things to keep in mind when you are reading the latest news about mortgage loan interest rates. Here are a few of them.

Mortgage Rates Change Daily

Don’t be surprised to check the news this morning and learn of rates moving in one direction only to find that the previous day’s gains or losses have been replaced with movement in a different direction. 

The daily fluctuations in mortgage loan interest rates is one reason why borrowers and lenders enter into mortgage rate lock agreements. Locking your rate in with the lender guarantees that the rate will not increase (for you) for the duration of the agreement. The goal is to get to your closing day before the rate lock commitment expires.

Mortgage Rates Are Not Offered in a Uniform Manner By All Lenders

This basically means you should shop around for the most competitive rates and terms. Not all lenders offer the same interest rates, and you will find enough variation depending on circumstances to justify the effort.

Mortgage Rates Offered May Be Lower Depending On The Nature Of Your Mortgage
Interest rates for 15-year loans are lower than for 30-year mortgages, and if you ask any lender for a loan with lower costs up front, the trade off might be a rate higher than the going rate. But you may have the option to pay discount points to lower the rate-prepaying now to get a lower rate and potentially lower monthly payments later.

Mortgage Rates Your Lender Offers Are Dependent on Credit Scores

The interest rate you are charged with a lower FICO score likely won’t be the same as if you had taken some extra time in the loan preparation process to work on your credit score. Borrowers who are closer to the bottom of the FICO score range for home loan approval won’t get the most competitive interest rates; the risk for the lender is higher and you may be charged accordingly whether it be via interest rates, a higher down payment, etc.

You can work on improving your FICO scores by reducing your credit card balances below the 50% line of your credit limit, paying on time every time, and cutting your overall debt ratio. Don’t waste your money paying a third party to do “credit repair”, you can do these things on your own.

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