Mortgage Loan Interest Rates in Early 2021

January 27, 2021

Mortgage rate watchers have noted for some time that home loan interest rates, while not directly tied to the performance of U.S.Treasuries, they do trend together typically. Finance blogs and mortgage writers have noted that in recent months mortgage rates have not moved directly in tandem with the ups and downs of Treasuries, but that a correction of sorts would be forthcoming at some point.

FHA Mortgage Rates in 2021

These same market watchers note that 2021 seems to be headed that way. FHA mortgage loan interest rates are still low, and still below the three percent zone. But if you expect them to remain there in 2021, you may be disappointed. All indications, at least according to the sources we use, point toward rates creeping higher this year.
 
There is potential to rise above the three percent range and borrowers who are trying to decide whether to “pull the trigger” on a loan application may want to consider that possibility if it’s not a matter of “are you ready?” but rather “when should we do this?”

We are a bit of a broken record on the subject of whether to apply now or not; if you simply aren’t ready yet, applying now won’t help. Even with low rates--historically low though they may be--if you haven’t properly prepared your credit, saved up your down payment, and saved to make your closing cost payments, you won’t have access to those low rates.

But if your finances are ready and it’s more a question of timing, you should consider searching for a lender or filling out loan documents sooner rather than later if the mortgage rate situation concerns you.

Credit Scores and Interest Rates

Some read this far and wonder why working on your credit plays such an important role in this process. An oversimplified answer is basically this; if you are rushing to get ready for a home loan because of historically low interest rates, don’t forget that your credit score is a factor in the interest rate your participating FHA lender will offer you.

Rushing to get a home loan now, without preparing your credit? It won’t help you get a lower rate if your FICO scores are too low.

Working on your credit at least 12 months ahead of time with on-time payments every time results in better scores. That 12 month record of on time payments is something your lender DEFINITELY wants to see and not just for the improved credit scores. It’s a reflection of what kind of credit risk you might be if your mortgage loan is approved.

Rates are likely to rise this year, and we may even witness them climb above 3.0%. If you are close on being ready to apply for the loan, why not discuss your needs with a participating FHA lender to see what might remain to be done to get you started on a home loan?

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