THE STATE OF CURRENT MORTGAGE RATES
The state of the U.S. economy has given the Fed confidence to increase interest rates for the better part of two years. As recently as June 2017, the average rate on a 30-year fixed mortgage rested at 3.9%. Today, the rate on 30-year fixed mortgages has jumped to 5.04%. In 2018 alone, the interest rate on 30-year fixed mortgages has jumped slightly more than a point, but I digress. While interest rates are on the rise, they remain near historical lows.
Let’s take a look at today’s average mortgage interest rates, and how they differ between four of today’s most common loans:
- 30-Year Fixed-Rate Mortgage Interest: 5.04%
- 15-Year Fixed-Rate Mortgage Interest: 4.38%
- 5/1 Adjustable-Rate Mortgage Interest: 4.39%
- 30-Year Jumbo Mortgage Interest: 4.92%
Typically, mortgage rates rise and fall in conjunction with the state of the economy. It is quite common to see mortgage rates rise in a healthy economy, whereas a down economy may elicit lower rates. More specifically, mortgage rates tend to fall when stock prices drop, foreign markets slide, unemployment rises, and inflation tempers. Conversely, rates typically rise when the stock market does well, foreign markets are healthy, unemployment is low, and inflation speeds up.
HOW TO SECURE THE BEST MORTGAGE RATE
Mortgage terms and rates continuously change, but there are a few things you can do as a borrower to make sure you get the best deal possible:
- Fix Your Credit Score: The better your credit score, the better the interest rate you are likely to receive. After all, those with better credit scores are considered less of a risk, which awards at least some peace of mind to lenders. In return, they may be willing to offer a lower rate. Fix any blemishes that appear and raise your credit profile as much as possible.
- Provide Your Employment History: In addition to boasting an encouraging credit score, borrowers are advised to have their employment history readily available. Doing so will tell the bank that you are less of a risk. A good employment history should suggest that borrowers are less of a risk, which begs the question: What’s a good credit history? They’ll want to see pay stubs and W-2s for at least two years; the more, the better.
- Put More Money Down: Prospective homebuyers will typically be able to receive lower interest rates if they put more money down at signing. 25%, in particular, seems to be the “gold standard.” Borrowers that can put at least 20% down won’t need to pay private mortgage insurance, and their lender may offer a lower rate.