The mortgage rate environment has been turbulent over the past year, soaring past 8% in October 2023 and falling to 6.69% in the week ending Jan. 25, 2024. But there are hopeful signs that mortgage rates may decline this year.
In this ever-evolving landscape, understanding the dos and don'ts when looking for a favorable rate can help homebuyers and property investors make an informed decision. Whether you're a first-time homebuyer or a seasoned property investor, here are some dos and don'ts to know.
Dos
Shop for Mortgage Rates
One of the most crucial steps in securing a favorable mortgage deal is to shop around for the best rates. Even rates that are just slightly lower to alternatives could result in thousands of dollars in savings.
With technology making information more accessible than ever, potential homebuyers have the advantage of comparing rates from various lenders online. We advise taking the time to research and gather quotes to increase your chances of finding a mortgage with terms that suit your budget.
Lock in a Good Rate When You Find One
Mortgage rates are notoriously unpredictable, subject to fluctuations influenced by economic factors. Mortgage rates can change on a daily basis. As such, when you find a favorable rate that aligns with your financial plan, don't hesitate to lock it in. Rate locks provide a safeguard against potential increases and ensure you secure the agreed-upon terms even if market conditions change. In addition, some lenders allow homebuyers to unlock their rate and secure a lower one before closing.
Don'ts
Wait for Mortgage Rates to Drop
Attempting to time the market by waiting for mortgage rates to drop is a risky strategy. While experts predict rates to remain within the 6% range this year, they can also rise unexpectedly. Instead of gambling on market trends, focus on securing a rate that fits your financial plan when you find it.
Damage Your Credit Scores
Your credit score plays a pivotal role in determining the interest rate you qualify for. Avoid making large purchases, opening new credit lines, or missing payments leading up to your mortgage application. If you have existing debts, consider paying down.
Skip Other Ways To Lower Mortgage Rate:
Beyond shopping for the best rate, explore other strategies to lower your mortgage rate. Consider making a larger down payment or opting for a shorter loan term. Additionally, some lenders offer discounts for automated payments or loyalty incentives.
Other ways to lower your mortgage rate also include applying for an adjustable-rate mortgage and purchasing mortgage points.
