Concerned About Mortgage Rates? Focus on What You Can Control

 

You’ve likely heard a lot about mortgage rates lately, especially with recent headlines about the Federal Reserve’s (the Fed) meetings and their potential impact. However, it’s important to understand that the Fed doesn’t directly set mortgage rates, despite what some headlines might suggest.

Mortgage rates are influenced by various factors including geopolitical uncertainty, inflation, and overall economic conditions. Predicting when these factors will align to bring rates down is difficult, making it generally unwise to try to time the market. Instead, it’s more practical to focus on what you can control.

Here are the key factors you can influence to make your moving plans a reality:

Your Credit Score

Your credit score significantly impacts your mortgage rate. As CNET points out:

“You can’t control the economic factors influencing interest rates. But you can get the best rate for your situation, and improving your credit score is the right place to start. Lenders look at your credit score to decide whether to approve you for a loan and at what interest rate. A higher credit score can help you secure a lower interest rate, maybe even better than the average.”

Maintaining a good credit score is crucial, especially with current rates. If you aim to improve your score, a trusted loan officer can offer expert advice to help you achieve that goal.

Your Loan Type

Different loan types come with varying terms and eligibility requirements. 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.”

When working with real estate professionals, explore the loan options available to you and identify which ones you may qualify for.

Your Loan Term

The term of your loan also affects your mortgage rate. Freddie Mac advises:

“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.”

Choosing the right loan term based on your situation can influence your mortgage rate.

Bottom Line

While you can’t control broader economic trends, you can control certain factors that influence your mortgage rate. Work with a trusted lender to understand and optimize these factors. By strategically managing your credit score, loan type, and loan term, you can potentially secure a more favorable mortgage rate despite current market conditions.