Home Loan Interest Rate Tips
June 3, 2024
An article published by Forbes Advisor on May 31, 2024, notes various home loan interest rate predictions. Some of them might surprise you. Others might not. In general, the feeling among industry pros is that rates aren’t going to take a nosedive anytime soon.
Some believe mortgage rates will hover in and around the mid-6 % range for the rest of 2024. Many note that ongoing issues related to the Fed and interest rate cuts are keeping rates at or near current levels.
What does that mean for the typical house hunter?
Waiting for Rates to Return to the 5% Range?
Borrowers holding out for rates closer to pre-pandemic levels will likely be disappointed if they hope for dramatic progress in 2024.
If you were delaying a home purchase, refinance, or home equity loan in hopes the Fed might slash rates in the meantime, indications going into the third quarter of the fiscal year are that disappointment awaits.
Many house hunters are adjusting their approach to buying because rates simply don’t seem headed toward 5% anytime soon.
Pro Tip: Make your plans regardless of the going interest rate. When you are ready to commit to making an offer on a specific home, the rates will become very important. Until then, they are numbers on a page.
Do What You Can to Improve Your Credit Reports
Note that we aren’t talking just about FICO scores, which are all-important but not the only important factor to be mindful of when applying for a new loan.
Your repayment history also counts, and if you were tempted to close those old credit accounts you just paid off, you may wish to reconsider.
Many financial pundits advise you to keep those accounts open, and rightfully so. The age of your credit makes a difference in the lender’s eyes. An old account with a low balance is worth far more in terms of FICO scores than you might think.
FICO scores affect the interest rate your lender offers. Applicants who are lower risk get better interest rates than those who have credit issues. It really can be as simple as that.
Pro Tip: Keep your credit accounts open, but reduce the balances on all accounts to below 50% of your credit limit for better results.
Reduce Your Principal Balance
One way to save money on interest rates is to begin your loan with a lower principal balance by making a larger down payment. Save up as much cash to make that downpayment as possible, but consider down payment gifts from friends and family.
Some borrowers use such gifts to save money out of pocket up front on the loan, but it is wise to make the downpayment yourself and use any gift funds to pay more on the loan before your mortgage actually begins.
That means you get closer to being able to opt out of mortgage insurance (typically required if you don’t make a large enough downpayment), which can also save you money over the lifetime of the mortgage.
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RELATED VIDEOS:
Learn How to Meet FHA Requirements
Understanding APR
Your Proof of Ownership Is the Property Title
Some believe mortgage rates will hover in and around the mid-6 % range for the rest of 2024. Many note that ongoing issues related to the Fed and interest rate cuts are keeping rates at or near current levels.
What does that mean for the typical house hunter?
Waiting for Rates to Return to the 5% Range?
Borrowers holding out for rates closer to pre-pandemic levels will likely be disappointed if they hope for dramatic progress in 2024.
If you were delaying a home purchase, refinance, or home equity loan in hopes the Fed might slash rates in the meantime, indications going into the third quarter of the fiscal year are that disappointment awaits.
Many house hunters are adjusting their approach to buying because rates simply don’t seem headed toward 5% anytime soon.
Pro Tip: Make your plans regardless of the going interest rate. When you are ready to commit to making an offer on a specific home, the rates will become very important. Until then, they are numbers on a page.
Do What You Can to Improve Your Credit Reports
Note that we aren’t talking just about FICO scores, which are all-important but not the only important factor to be mindful of when applying for a new loan.
Your repayment history also counts, and if you were tempted to close those old credit accounts you just paid off, you may wish to reconsider.
Many financial pundits advise you to keep those accounts open, and rightfully so. The age of your credit makes a difference in the lender’s eyes. An old account with a low balance is worth far more in terms of FICO scores than you might think.
FICO scores affect the interest rate your lender offers. Applicants who are lower risk get better interest rates than those who have credit issues. It really can be as simple as that.
Pro Tip: Keep your credit accounts open, but reduce the balances on all accounts to below 50% of your credit limit for better results.
Reduce Your Principal Balance
One way to save money on interest rates is to begin your loan with a lower principal balance by making a larger down payment. Save up as much cash to make that downpayment as possible, but consider down payment gifts from friends and family.
Some borrowers use such gifts to save money out of pocket up front on the loan, but it is wise to make the downpayment yourself and use any gift funds to pay more on the loan before your mortgage actually begins.
That means you get closer to being able to opt out of mortgage insurance (typically required if you don’t make a large enough downpayment), which can also save you money over the lifetime of the mortgage.
------------------------------
RELATED VIDEOS:
Learn How to Meet FHA Requirements
Understanding APR
Your Proof of Ownership Is the Property Title
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Learn what your score means.
