Downward motion in 2024 mortgage trends is welcome news for home buyers. However, mortgage rates remain high.
Home loan rates depend on several factors. Some of these factors are beyond your control. You can still take steps to get the best possible rate for your mortgage.
Buying property in Texas gives you an advantage: current mortgage rates here are lower than the national average.
Learn more about mortgage rates and how to find the most competitive loan.
What Determines Mortgage Rates?
Many people assume that the Federal Reserve sets mortgage interest rates. When the Fed changes short-term interest rates, mortgage rates usually follow.
In fact, market factors and your personal qualifying factors affect the interest rate a lender will offer you. The length of the mortgage is also a factor.
Market Factors
Market factors that affect mortgage rates include:
- Interest rate on bonds
- Inflation
- The economy
The interest rate on bonds affects mortgage interest rates through mortgage-backed securities. Mortgage-backed securities are groups of mortgages sold on the bond market. If the price of bonds is high, mortgage rates go down, and vice versa.
Inflation is a major factor in current mortgage rates. When inflation rises, interest rates rise so lenders can keep up with the value of the dollar.
The economy also affects mortgage interest rates. Mortgage rates usually go up when the economy is doing well because home buyers are willing to keep borrowing. Rates usually go down when the economy isn't doing as well.
Personal Factors
Within the range of current mortgage rates, lenders will offer you a rate based on your personal financial history. This is why comparing rates from several lenders is so important. The two main factors are:
- Your credit score
- Loan-to-value ratio
Lenders see borrowers with high credit scores as less risky, so they offer lower interest rates.
The loan-to-value ratio compares the amount of your mortgage to the price of the property. A lower ratio usually means a lower mortgage rate. A higher down payment lowers your loan-to-value ratio, making the loan less risky.
Finally, you'll typically get a lower rate for a shorter mortgage term. The lender gets their money back sooner.
Fixed-Rate vs Adjustable-Rate Mortgage
You have the option of a fixed-rate or adjustable-rate mortgage. The interest rate for a fixed-rate mortgage stays the same for the entire loan term. It may be higher than for an adjustable-rate mortgage, but your payments won't increase if market interest rates rise.
The interest rate for an adjustable-rate mortgage changes according to the loan terms. The introductory rate is usually very attractive. However, the lender can raise the rate later, which increases your monthly payment.
Finding the Best Mortgage Rates
Finding the best mortgage rates can save you thousands of dollars over the life of the loan. You can't control every factor, but you can take steps like improving your credit score to get a better rate.
PMI Metroplex Properties can help you through the process of buying real estate in Bedford and the Metroplex. We understand that first-time homebuyers have different needs than seasoned investors. Our experienced team will help you find the home you want with a mortgage you can afford.
Schedule a consultation with PMI Metroplex Properties today to discuss how our local expertise can bring your next home within reach.
