How to Time Your Purchase to Take Advantage of the Lowest Mortgage Rates
11/10/2010
When you take out a home purchase mortgage, you're taking out a loan that you'll be paying off for a long time. Most home loans take at least thirty years to pay back. As long as there is an outstanding balance on the principal of the loan, you will also have to pay back interest. Interest costs can add up to an incredible amount over time, and as a result, getting one of the lowest mortgage rates available is hugely important.
It's difficult to know when mortgage rates are at their lowest, however. The following tips will help you determine when to apply for a loan to get the best mortgage rate.
1. Track Treasury note yields and the Fed Funds rate. Mortgage rates aren't pulled out of thin air. Rather, they are based on different market rates within the overall economy. Fixed rate mortgage rates are based on Treasury note yields. As these increase or decrease, fixed rate mortgage rates increase and decrease respectively. Adjustable rate mortgages are based on the Fed Funds rate. Track these two rates and keep an eye on whether they are trending up or down.
2. Review mortgage rate patterns from the past. Mortgage rates have been making history recently. With that in mind, look back over previous decades and try to spot trends. How long did mortgage rates stay low before increasing? How high did they peak? What were the economic factors that caused these fluctuations?
3. Understand that you can't ever truly predict the market. Nobody can fully predict what the market will do, and as a result, nobody knows for sure where mortgage rates will go next. Still, you can gain a solid idea about what major changes to expect, and this can help you determine when to purchase or refinance your home.
The biggest factor that can influence whether or not you'll get a good mortgage rate is the lender you choose to work with. It will also depend on you. Your rate will change based on your credit score, your loan type, and whether you're pursuing a special program such as an FHA mortgage. Take the time to compare different lenders and find the mortgage package that best meets your needs.
