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What does it mean for mortgage rates to drop so low? There are a variety of factors that have contributed to these low rates but the most important thing to understand is that those numbers are subject to change--sometimes quickly, sometimes not.

FHA Rates Near 50 Year Low!

Now is the time to drop the interest rate on your 30-year mortgage or refinance into a 15-year home loan.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

Home Loan Interest Rates Below 3% in June 2020

June 12, 2020

Home Loan Interest Rates Below 3% in June 2020
On June 3, 2020, Money magazine reported mortgage rates falling below three percent. That is definitely true for government-backed mortgages like FHA home loans, and conventional loans hover right at three percent depending on the loan term (some sources report the 52-week average for 30-year fixed rate mortgages at roughly 3.03%).

What does it mean for mortgage rates to drop so low? There are a variety of factors that have contributed to these low rates but the most important thing to understand is that those numbers are subject to change--sometimes quickly, sometimes not.

That is why there’s something called a mortgage rate lock commitment--borrowers who put an offer on a home and want to fully commit to the mortgage make an agreement with the bank to lock in the interest rate for a specific amount of time (the amount of time it usually takes to get to closing day). This protects the borrower from interest rate changes in the meantime.

Borrowers have the option to “lock” the interest rate in with that agreement, or to “float” and hold off on making that interest rate commitment in hopes that rates might drop even lower. 

Locking and floating carry their share of risks, but at the end of the day those who lock only risk missing out on a rate change; those who float may find rates have moved higher in the meantime and they may have to settle for a higher interest rate than they had anticipated.

Money Magazine reports the same thing we discuss here; a borrower’s credit score is instrumental in getting the lowest rate possible. According to Money, “Generally, borrowers need a FICO score of 740 or higher to qualify for the lowest mortgage rates on a conventional loan.”

That means that the interest rates you see advertised, especially the ones saying “lowest ever” will be accessible to those who have good credit. 

But you can take steps before you apply for a new loan to improve your credit; know and monitor the contents of your credit report and work on lowering your debt load. It’s also key to establish 12 months or more of on-time payment for all financial obligations.

Some borrowers choose a shorter loan term to get a lower rate and a faster payoff of their mortgages. A 15-year FHA mortgage will have higher monthly payments, but a lower interest rate than an FHA’ 30-year mortgage and the short loan term provides more savings (of interest payments over time).

Some borrowers are ready to apply, have good credit scores, and wonder if now is THE best time to lock a mortgage loan interest rate. Yes, it’s true that rates have the potential to go even lower depending on circumstances.

But there are no guarantees and market volatility could drive mortgage rates higher tomorrow. If you are happy with the rate you have been offered, it may be wise to lock the rate and don’t look back.

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