The average 30-year fixed-rate mortgage rose above 4% for the first time since May 2017, according to the latest Freddie Mac survey.
Several factors are driving mortgage interest rates
For the week ending January 18, benchmark mortgage interest rates ticked up to levels not seen in more than seven months.
The 30-year fixed-rate mortgage averaged 4.04% — up from 3.99% last week.
“Some may be wondering if this is the last time we’ll see a three handle on the 30-year mortgage rate,” says Len Kiefer, Freddie Mac’s Deputy Chief Economist. “Never say never, but inflation is firming.”
Kiefer also cites strong economic growth and a contracting labor market as factors moving the needle on mortgage rates.
“This means upward pressure on long-term rates, like the 30-year fixed-rate mortgage, is building.”
Meanwhile, rates for 15-year mortgages — which are a great way to reduce debt in half the time versus a 30-year loan — averaged 3.49%. That’s up slightly from 3.44% last week.
What you need to know if you’re shopping for a mortgage
Here are some key pointers to keep in mind as you undertake the process of qualifying for a loan and shopping for a home.
Check your credit score for free
Before applying for a mortgage, you’ll want to check your credit. All the major credit card companies will now give you your real FICO score for free each month. Either look on your statement or check your account online.
Pull a free copy of your credit reports
You want to be sure there are no surprise delinquencies eating up your credit before applying for a mortgage.
You can get free copies of your credit reports at AnnualCreditReport.com.
If there are surprise dings, many times they’ll be small balance bills from a medical provider. Get those things paid off as soon as possible before you apply for a mortgage.
Pre-qualify for a mortgage
When you’re finally ready to get going, be sure to pre-qualify for a mortgage before you start the formal shopping process. By doing this, you can get an idea of what kind of home you can afford and what the monthly payment will look like.
Know the right way to go through underwriting
If you and a partner or spouse want to buy a home, you may want to try to qualify for mortgage underwriting on just the income of the person who has a better score.
Unfortunately, most lenders will base your rate on the lower score if you’re a couple — not the higher score.
Be sure you get more than one quote
Most people only get one mortgage quote. That’s the wrong way to go about it. You’ll want to get quotes from multiple lenders to get access to the best deals.
Check with a local bank or credit union and maybe even get an online quote or two. Credit unions in particular offer creative mortgage terms that can save you money.
Do all your shopping for mortgage rates within a window of time
Each time a lender pulls your credit to give you a quote for a mortgage interest rate, it will ding your credit file. You can minimize the damage by getting all quotes within a 14-day period.
That way it doesn’t look the credit bureaus like you’re applying for multiple loans from multiple lenders each time!
Know the junk fees
When you apply for a mortgage, you’ll face a variety of junk fees. Many of them can negotiated down or away altogether. Know the junk fees so you can take action!
Get your down payment together
The FHA Loan Program generally lets you bring the least amount of money to the closing table possible. Most FHA loans require only a 3.5% down payment. If you don’t go the FHA route, many loans will require 20% down payment.