What Days Are Best For Locking Mortgage Rates
So, now that we know how work, which days are the best for locking them? To find out, we enlisted the help of MBSQuoteline, a publisher of real-time MBS pricing.
First, we looked at four years of data, from August 2011-2015, and sorted closing market prices by days of the week.
Next, we looked at the change in pricing between successive days to assess daily volatility.
Then, finally, we removed the two largest daily movements for each weekday during the 4-year period to reduce the outlier effect.
What we found is that Monday is the calmest day in mortgages and Wednesday is the liveliest.
- Monday: 17.3 basis point change, on average
- Tuesday: 20.3 basis point change, on average
- Wednesday: 23.8 basis point change, on average
- Thursday: 20.1 basis point change, on average
- Friday: 23.6 basis point change, on average
In general, 25 basis points equates to a 0.125 percentage point change in mortgage rates.
This means that, on average, we should expect mortgage rates to move ±1/8 percentage point on Wednesdays and Fridays, and not at all on Mondays.
Its no accident that Wednesdays and Fridays are most volatile, either. These two days coincide with some of the most important news to affect MBS pricing and the markets.
The Federal Reserve adjourns from its FOMC meetings on every sixth Wednesday, for example, and when the Fed meets, mortgage rates can change in a hurry.
On the flip side, rates could also rise on those days so be sure to understand your risks.
What Is The Difference Between The Interest Rate And Apr On A Mortgage
Borrowers often mix up interest rates and an annual percentage rate . Thats understandable since both rates refer to how much youll pay for the loan. While similar in nature, the terms are not synonymous.
An interest rate is what a lender will charge on the principal amount being borrowed. Think of it as the basic cost of borrowing money for a home purchase.
An represents the total cost of borrowing the money and includes the interest rate plus any fees, associated with generating the loan. The APR will always be higher than the interest rate.
For example, a $300,000 loan with a 3.1% interest rate and $2,100 worth of fees would have an APR of 3.169%.
When comparing rates from different lenders, look at both the APR and the interest rate. The APR will represent the true cost over the full term of the loan, but youll also need to consider what youre able to pay upfront versus over time.
Money’s Average Mortgage Rates For September 9 2022
Mortgage rate moved lower across all loan categories today. The average rate for a 30-year fixed-rate loan was down for the second day in a row, decreasing by 0.136 percentage points to 6.731%.
- The latest rate on a 30-year fixed-rate mortgage is 6.731%.
- The latest rate on a 15-year fixed-rate mortgage is 5.601%.
- The latest rate on a 5/6 ARM is 6.395%.
- The latest rate on a 7/6 ARM is 6.422%.
- The latest rate on a 10/6 ARM is 6.393%.
Money’s daily mortgage rates are a national average and reflect what a borrower with a 20% down payment, no points paid and a 700 credit score roughly the national average score might pay if he or she applied for a home loan right now. Each day’s rates are based on the average rate 8,000 lenders offered to applicants the previous business day. Your individual rate will vary depending on your location, lender and financial details.
These rates are different from Freddie Macs rates, which represent a weekly average based on a survey of quoted rates offered to borrowers with strong credit, a 20% down payment and discounts for points paid.
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How Do Your Credit Scores Affect Your Rate
Your credit scores influence your mortgage interest rate. Lenders call it risk-based pricing. Higher credit scores indicate a lower risk that youll default on a loan so you get a better interest rate. The lower your credit scores, the higher your interest rate.
Can I Lock In My Mortgage Rate After I Get Approved
Yes, you can lock in your mortgage rate after you get approved. However, its crucial to ensure that youre locked at an interest rate youre comfortable with. A mortgage rate lock freezes your interest rate until the loan closing. Since mortgage rates are constantly fluctuating, the rate can fluctuate enough to cost or save you thousands during loan processing or underwriting.
With a mortgage rate lock, a lender essentially guarantees to keep your interest rate constant for a specified period. Doing so protects you from higher rates, but it also keeps you from benefiting from lower interest rates. Lock periods can last 30 days, 60 days, or longer. Its advisable to select a period that allows plenty of time for loan closing. The benefits of locking in your mortgage far outweigh the risks. For instance, you might be required to come up with a higher down payment if the rates go up.
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Whats Ahead For Mortgage Rates
Mortgage rates follow the path of the bond market, which takes its cues from the Feds rate moves. The central bank has raised the federal funds rate throughout the year in an effort to rein in inflation, and most analysts say another sizable rate hike is coming Sept. 21 after the latest inflation report showed prices continued to accelerate in August.
Mortgage rates arent directly impacted by the Feds actions, but they are tied to movement in the bond marketso when yields go up, so do mortgage rates. And when the Fed raises rates, investors tend to sell their bonds, causing bond prices to go down, and yields go up.
Interest rates continue to be volatile as markets adjust expectations for Fed rate hikes, said Zillow Home Loans vice president Paul Thomas, in a statement. The latest Consumer Price Index showed more persistent inflation than expected. As a result, investors are now fully pricing in a 75-basis point hike in the Fed Funds rate at the next FOMC meeting, driving up interest rates.
Many mortgage market forecasts released over the summer called for rates to move roughly sideways, ending the year with an average 5% for the 30-year fixed. After this weeks sharp moves, however, its possible that some experts may revise their forecasts higher.
Mortgage Rate Predictions For September 2022
Rates for home loans are caught in a tug-of-war between rising inflation, which pushes rates higher, versus the Federal Reserveâs actions to maintain inflation, which indirectly moves mortgage rates lower.
The Federal Reserve began hiking its benchmark interest rate in March and then in July, it raised the rate by 75 basis pointsâthe largest increase since 1994.
âThe Federal Reserve has increased the target fed funds rate by 1.5 percentage points through the first half of 2022 and the markets have been pricing in more aggressive rate increases,â wrote Freddie Mac economists, in a July 20 forecast. âAs a result, mortgage rates have been volatile over the past few weeks.â
As a result of these market conditions and Fed actions, most housing-market experts think rates will essentially bob sideways for the rest of the year. Average rates for a 30-year, fixed-rate mortgage surged as high as 5.81% in late June, but have since leveled off at 5.55% as of August 25, according to Freddie Mac. Thatâs still nearly double the rate of 2.86% a year ago.
As of August 25, 2022, experts are forecasting that the 30-year, fixed-rate mortgage will vary from 5% to 6% throughout 2022:
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Shop Multiple Mortgage Lenders
Shop around with a few different lenders, such as credit union, local banks, or online lenders to see who gives you the best offer. Make sure youre dealing with a very reputable lender in these times. It is now more important, says Boomer. Pay attention to the fees and not just the interest rate. For example, one lender may quote a low rate but charge higher fees, defeating the point of the low rate. Ask your current banks or financial institutions if they have offers for existing customers, Derks told us
How Our Mortgage Interest Rates Are Calculated
We use Bankrates daily mortgage interest rate data for our mortgage rate trends. These overnight rates are based on a specific personal financial profile, which only includes loans for primary residences where the borrower has a FICO score of 740+. Bankrate is part of the same parent company as NextAdvisor.
The mortgage interest rate data listed below and based on the Bankrate mortgage rate survey:Current average mortgage interest rates
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Work On Your Credit Profile
The average mortgage rate reported in the news is just the average. What borrowers need to focus on is their own personal credit profile. Take care, first and foremost of your credit quality, Derks told us. The better your credit score the better the interest rate and loan type you can qualify for.
How Much Of A Mortgage Am I Qualified For
Youll need to apply for mortgage preapproval to get an estimated loan amount you could qualify for. Lenders use the preapproval process to review your overall financial picture including your assets, credit history, debt and income to calculate how much theyd be willing to lend you for a mortgage.
You can use the loan amount printed on your preapproval letter as a guide for your house hunting journey. But, be careful not to stretch your budget too thin and borrow to the maximum your preapproval amount doesnt factor in recurring bills that arent regularly reported to the credit bureaus, such as gas, cellphones and other utilities, so youll need to retain enough disposable income to comfortably cover these monthly bills, plus your new mortgage payment.
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Todays Mortgage Rates And Your Monthly Payment
The rate on your mortgage can make a big difference in how much home you can afford and the size of your monthly payments.
If you bought a $250,000 home and made a 20% down payment $50,000 you would end up with a starting loan balance of $200,000. On a $200,000 home loan with a fixed rate for 30 years:
- At 3% interest rate = $843 in monthly payments
- At 4% interest rate = $955 in monthly payments
- At 6% interest rate = $1,199 in monthly payments
- At 8% interest rate = $1,468 in monthly payments
You can experiment with a mortgage calculator to find out how much a lower rate or other changes could impact what you pay. A home affordability calculator can also give you an estimate of the maximum loan amount you may qualify for based on your income, debt-to-income ratio, mortgage interest rate and other variables.
Other factors that determine how much you’ll pay each month include:
Choosing a 15-year mortgage instead of a 30-year mortgage will increase monthly mortgage payments but reduce the amount of interest paid throughout the life of the loan.
Fixed vs. ARM:
The mortgage rates on adjustable-rate mortgages reset regularly and monthly payments change with it. With a fixed-rate loan payments remain the same throughout the life of the loan.
Taxes, HOA Fees, Insurance:
Homeowners’ insurance premiums, property taxes and homeowners association fees are often bundled into your monthly mortgage payment. Check with your real estate agent to get an estimate of these costs.
Closing Costs & Loan Fees
The industry term for the upfront fees you pay when you get a home loan is closing costs. The fees for your appraisal, title insurance, and any lender origination charges are all part of your closing costs. Certain closing costs vary by loan size, but overall you can expert to pay 3% to 6% of the total loan balance.. Paying attention to the closing costs you pay is important because the higher your closing costs, the higher your annual percentage rate will be.
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Mortgage Rates Can Change During The Day
- Intraday rate changes are also possible
- If significant economic events take place during market hours
- Like Fed meetings, major policy changes, or geopolitical events
- That alter demand for bonds and/or mortgage-backed securities
So we know mortgage rates have the ability to change on a daily basis, but sometimes mortgage rates may even change more than once during the same day if certain economic reports are released.
Things like Federal Reserve meetings, a bump in the 10-year Treasury yield, MBS prices, home sales data, economic activity, and other related mortgage news may make rates rise from day to day.
In other words, your interest rate is never really secure until it is locked and you receive written confirmation from the lender.
For example, a mortgage rate quote provided in the morning may no longer be valid that same afternoon.
If you drag your feet and tell the loan officer youll get back to them, even if just hours later, the rate may be ancient history.
Remember, if you want a guaranteed interest rate on your mortgage, you need to lock it in.
I cant stress this enough often times borrowers will be promised a certain interest rate or simply be told that interest rates are X and not to worry.
Finally, be sure to take the time to compare rates and compare lenders too.
Why And How Often Do Mortgage Rates Change
Mortgage rates are in constant flux, changing all the time every day. Each morning, Monday through Friday, banks and other lenders receive mortgage rate sheets that stipulate that days interest rates. These rate sheets are released daily, Monday through Friday, except on holidays.
So, why do mortgage rates fluctuate so much? A lot of factors impact mortgage rates same as with stocks.
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How To Compare Mortgage Rates
While online tools, , allow you to compare current average mortgage rates by answering a few questions, you’ll still want to compare official Loan Estimates from at least three different lenders to ensure you are getting the best mortgage rate with the lowest monthly payment.
After applying for a mortgage, the lender will provide a Loan Estimate with details about the loan. Pay specific attention to which lender has the lowest mortgage rate, APR, and projected principal and interest payment. Then review the Origination Charges located on the Loan Estimate under Loan Costs to see how much the lender is charging in fees . The higher the fees and APR, the more the lender is charging to procure the loan. The remaining costs are generally applicable to all lenders, as they are determined by services and policies the borrower chooses, in addition to local taxes and government charges.
What Credit Score Do Mortgage Lenders Use
Most mortgage lenders use your FICO score a credit score created by the Fair Isaac Corporation to determine your loan eligibility.
Lenders will request a merged credit report that combines information from all three of the major credit reporting bureaus Experian, Transunion and Equifax. This report will also contain your FICO score as reported by each credit agency.
Each credit bureau will have a different FICO score and your lender will typically use the middle score when evaluating your creditworthiness. If you are applying for a mortgage with a partner, the lender can base their decision on the average credit score of both borrowers.
Lenders may also use a more thorough residential mortgage credit report that includes more detailed information that wont appear in your standard reports, such as employment history and current salary.
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What Role Does The Federal Reserve Play
The Federal Reserve plays a significant role in determining your mortgage rate. While the Fed doesnt set mortgage rates directly, it does set the federal funds rate. The Fed meets eight times a year, and mortgage rates change both in anticipation of what the Fed will do and in reaction to what the Fed actually does.
The Fed has started raising rates, with the most recent rate hike occurring in 2022, and more expected this year. This rate increase has already had an impact, with mortgage rates climbing. Suspected future rate increases are expected to continue to cause mortgage rates to rise.
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What Is The Best Mortgage Loan Type
The best mortgage is the one that helps you meet your housing needs for as little financing costs as possible. There are a few factors to consider when it comes to getting the right mortgage.
Some experts recommend getting a 15-year mortgage because youll pay far less interest and be debt-free in half the time compared to a 30-year loan. With a 30-year loan, your monthly payments can be significantly lower, but youll pay much more in interest over the loans life. So its a tradeoff.
There are also tradeoffs in choosing a government-backed versus a conventional loan. For example, FHA mortgages can have lower requirements than conventional loans. But unlike conventional loans, FHA loans require mortgage insurance even if your loan-to-value ratio drops below 80%.
If you want a set interest rate for the life of the loan and more stable monthly payments, then a fixed-rate mortgage is ideal. The interest rate on a fixed-rate mortgage never changes.
Regardless of what loan type you go with, remember, its not the loan you have to keep forever. Even if you stay in the same home for the rest of your life, you can refinance your mortgage to take advantage of better terms or rates.
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