FHA Mortgage Loans and Rising Rates
At the time of this writing, FHA 30-year fixed rate mortgages had a 52-week average at 2.25% (best execution or assuming ideal circumstances) at the lowest end and 4.0% at the highest. But the rates for FHA 30-year fixed rate mortgages at press time were closer to 2.88%. That’s a fairly significant rise from the lowest point on the 52-week average.
What’s going on?
A Rising Mortgage Rate Environment?
Ask market watchers who do this job professionally and you’ll learn that among some of these pros, the economic stimulus has at least a partial role. The way this is described by some mortgage finance writers goes something like this--economic stimulus affects the availability of Treasury bills.
With the stimulus comes greater supply in Treasuries, and that can translate into higher interest rates. That is NOT the only factor affecting mortgage rates, but it’s one people are paying attention to.
What does all this mean? It means that at press time, the going wisdom is that the U.S. mortgage market is in an environment quite favorable to rising interest rates. Those who did not commit to a loan while rates were at 2.25% (best execution) can still commit to a mortgage loan below the three percent line (again, assuming ideal conditions including a well-qualified borrower, a condition known as “best execution”).
Mortgage Rates and Your Credit
But what some newcomers to mortgage borrowing don’t get at first? The rates you see advertised or listed online don’t necessarily translate to a consistent number offered to all applicants. Your credit scores will help determine what rate is offered to you.
Which is why it’s important to not race to the bargaining table if you aren’t truly ready to apply for a loan. Even if there are still-low interest rates available when you do, if you haven’t worked on your credit, saved enough for your down payment, or other steps in the process toward becoming a homeowner, you may find yourself turned down for a mortgage.
Prepare Before You Apply
If you take the time to work on your credit, make sure your financial affairs are in order, and ensure you have saved or have an acceptable source of a down payment, when you do apply for the loan your chances are far greater to get your loan approved than if you rush into the process without taking care of your finances first.
Your lender wants to see at least a year of on-time payments on all financial obligations and you should make sure your credit report is current, accurate, and does not have evidence of identity theft.
What Is an FHA Loan?
Using an FHA Loan Calculator
Meeting FHA Loan Guidelines Improves Your Chances
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