Don’t Be Confused! Understanding Mortgage Rates

By Travis Bard

We have a simple goal - impact the lives of our clients and change the lives of our agent partners. The PLACE.com business platform allows us to do both and we could not be more excited about the future.

There’s been a lot of attention focused on interest rates in the news lately. It might be confusing for some, which is why I would like to talk about how residential rates are set.

Just to make it clear, residential mortgage rates are not directly set by the Federal Reserve. It is the prime rate changes that are being talked about in the news, yet they only indirectly impact mortgage rates. The daily fluctuations in mortgage rates are more influenced by the bond market, and they are affected by the investor’s willingness to buy bonds. Lastly, there were talks about rate declines, but so far, we haven’t seen that yet. Because of this, many people are asking: What if rates go down while you’re under contract to buy a home? Here are some things that you can do:

1. Work with the right lender. A good lender is someone who looks out for your best interests and is willing to adjust your loan as needed. Locking your rate keeps it fixed. What a proactive lender will do is monitor the market and suggest locking your rates when they’re going up or waiting based on market conditions or predictions.

2. Explore lender buydown programs. One of the lenders that we know, Envoy Mortgage, has a lender-paid-buydown program. Their rates are competitive, and they pay for a one-year decrease in your rate, sometimes up to a full point.

3. Refinancing options. Some lenders will offer to cover some initial costs related to refinancing your mortgage if rates go down significantly.

We are in a new rate environment, and while rates might slightly go down in the long run, we may not see the 3% rate environment again for quite some time, if ever. It is likely that rates will stay in the 5%, 6%, and 7% ranges. This is why working with a qualified lender with good interest rate programs is important, as they can help you while you process your loan. They’re also there for you after your loan closes to help you improve the rates if the environment moves that direction.

If this is a direction that you might want to explore, let us help you. We can open conversations with lenders to do what best fits your situation and lower the cost of your loan during the buying process. You can always call us or send us an email, and we’ll do our best to help you.