Purchasing a home is a significant financial decision. Understanding mortgage rates can help you feel confident in your decision for years to come. Whether you’re a first-time homebuyer, an expert, or somewhere in between, learning what has the biggest impacts on mortgage rates can help you make informed decisions to save you money long term.

What are Mortgage Rates?

Mortgage rates are interest rates that lenders charge borrowers for borrowing money for a mortgage, and reflect a percentage of your total loan balance. When a borrower takes out a mortgage, they agree to pay back the amount borrowed, plus interest over a specific period of time, typically in 15 or 30 years. Stay ahead of major factors that impact current mortgage rates so you can be prepared for your future mortgage. 

What Impacts Mortgage Rates?

There are many factors that can impact mortgage rates including the following: 

• The economy: Mortgage rates are influenced by the overall health of the economy. A strong economy typically results in higher mortgage rates, while a weaker economy tends to lead to lower rates.
• Inflation: Inflation is another factor that can impact mortgage rates. When inflation is high, lenders may increase interest rates to keep up with rising costs.
• The Federal Reserve: The Federal Reserve plays a significant role in determining mortgage rates. The Fed can raise or lower interest rates to influence economic activity, which in turn can impact mortgage rates.
• The borrower’s credit score: Borrowers with higher credit scores are typically offered lower interest rates, as lenders view these borrowers as less risky.
• Loan term: Generally, shorter loan terms come with lower interest rates than longer loan terms.
• Type of mortgage: The type of mortgage you choose can impact the interest rate. There are various types of mortgage loans, so be sure to do your research on which one is best suited for you.

How Can You Secure The Best Mortgage Rate?

If you are looking to secure the best mortgage rate, you may want to consider the following options: 

• Improve your credit score: Improve your credit score before applying for a mortgage. A higher credit score generally means a lower interest rate. 
• Make a larger down payment: Save for a larger down payment. Lenders may offer lower interest rates to borrowers who make a larger down payment. 
• Consider a shorter loan term: A shorter loan term typically comes with a lower interest rate. If you can afford the higher monthly payments, consider opting for a 15-year mortgage instead of a 30-year mortgage.
• Lock in your rate: Once you’ve found a favorable interest rate, consider locking it in to protect against future rate increases.

Mortgage 1 Can Help You Navigate the Mortgage Process

At Mortgage 1, we understand the importance of educating homebuyers about mortgage rates. Our Pro SNAP application makes it fast and easy. Get pre-approved in as little as 15 minutes. Get started today, or call us at 1-866-532-0550.