Homebuyers have a lot of things to factor in and consider when it comes to their home-purchasing decisions, not least of which is affordability. And one of the things that most heavily impact affordability is the mortgage interest rate. So getting the best interest rate is (or should be) paramount for most homebuyers. Here is what Redlands homebuyers need to know about current mortgage rates.
Latest Trends in Mortgage Rates
When it comes to current mortgage rates, there’s plenty of good news for Redlands homebuyers. The rates are at near historic lows and look to trend slightly downward in the coming months – but they will begin to go up again in the not-too-distant future.
After an uptick very early this year, “interest rates fell below 3% in July across many home loan products, including the popular 30-year fixed-rate mortgage. Rates also dropped to near-record lows on 15-year fixed-rate mortgages, which are commonly used for refinancing.”
Further, according to industry watchers, “data suggests a downward trend into the summer months. 30-year rates have been hovering around 3% since April, with a more significant drop on July 8 following the dip in U.S. Treasury yields. But these historically low mortgage rates won’t last forever. The Federal Reserve predicts two rate hikes by 2023, which will almost certainly cause interest rates on mortgages to rise. Mortgage Bankers Association (MBA) predicts that rates on a 30-year mortgage will rise to 4.9% in 2023.”
What this means for Redlands homebuyers is that now is the time to buy. If you buy now, you can “lock in a sub-3% mortgage rate. . . . Don’t miss out on historically low mortgage rates again, because it’s impossible to know if rates will continue to drop or even how long they’ll stay this low.”
But you do need to shop around to make sure you get the best deal possible on mortgage rates. And rates vary from area to area and city to city. So be sure to contact a Redlands agent to find out what you’re looking at with respect to rates where you want to buy. To discover more about this, just call (951) 232-9704.
Important Mortgage-Rate Considerations
Besides knowing what current mortgage rates are and the trends in rates, Redlands homebuyers have a couple more important considerations. These are . . .
FIXED-RATE OR ADJUSTABLE-RATE
Homebuyers have two basic mortgage options beyond the term of the loan: a fixed-rate mortgage and an adjustable-rate mortgage.
With a fixed-rate mortgage, you are locked into a “consistent interest rate that you’ll pay over the life of the loan. The part of your mortgage payment that goes toward principal plus interest remains constant throughout the loan term, though insurance, property taxes, and other costs may fluctuate.”
With an adjustable-rate mortgage (as the name indicates), the interest rate can and usually does change over time. Typically, an adjustable-rate mortgage, “begins with an introductory period of 10, seven, five, or three years (or even one year), during which your interest rate holds steady. After that, the rate may change periodically.” And that upward change in the interest rate means that your mortgage payments will increase after the introductory period, sometimes substantially.
The other mortgage rate-related consideration involves what are known as “points.” These points are fees you pay to reduce the interest rate on your mortgage. Typically, one point is equivalent to 1% of the amount of the loan and will reduce the rate by 0.25% (although this reduction can vary).
You do need to be aware that “when you pay discount points, you typically shell out thousands of dollars upfront to save a few dollars every month. It takes several years for the monthly savings to add up to where they exceed the initial amount paid. This break-even period varies depending on the loan amount, the cost of the points, and the interest rate. It’s often seven to nine years. If you don’t plan to have the loan for that long, it’s a good idea to skip the discount points.”
How to Get the Best Mortgage Rates
As with any other major purchase, Redlands homebuyers need to do plenty of comparison shopping in order to get the best deal on mortgage rates. Here’s what you need to do…
Apply for a mortgage with several or multiple lenders because different lenders offer different rates. Shopping by applying with multiple lenders will allow you to find the one that offers the best rates. And be sure to apply with different kinds of lenders in your comparison shopping – banks, credit unions, and online lenders, for example.
Be aware, though, that you need to do this within a certain timeframe.“The three big credit bureaus encourage you to shop around.” But “you have only 14 to 45 days, depending on the scoring model, to apply for as many mortgages as you want with the same effect on your credit score as applying for one loan.”
Also, make a point, while shopping lenders for the best interest rates, to compare closing costs. You can get an accurate idea of the closing costs from the Loan Estimate, which each lender is required to provide. This is an important element of comparing mortgage offers.
The Final Ingredient
The final important ingredient is, of course, working with an experienced, local Redlands real estate agent. Although not a financial advisor, your agent can point you in the right direction for getting the best rates. In addition, your agent can help you get the best deal possible on your home purchase – and a lower rate combined with a lower purchase price is a pretty sweet deal. So if you’re a Redlands homebuyer looking to get good mortgage rates and a better deal, contact us today at (951) 232-9704.