Just as we headed into 2019, the FHA and HUD announced higher FHA loan guaranty limits for the new year, giving most counties a boost in the dollar amount the FHA would back for an FHA mortgage loan.
Now, as we read headlines from reputable sources including Marketwatch, about home loan interest rates, it seems like now is a very good time to be a first-time home buyer or a repeat borrower looking to purchase or refinance residential property with an FHA mortgage.
One recent Marketwatch article about home loan interest rates includes the blurb. “Rates for home loans were mixed, but stayed near recent lows, even as bond market moves suggest another big step down lies ahead. “
That is according to Andrea Riquier’s June 20th article titled, “Mortgage rates are moving sideways. Will they fall from here?” and there are some important takeaways from both the article and the current interest rate trends you should be aware of.
The Marketwatch article notes, “30-year-fixed has averaged 4.21%, down from 4.54% in 2018”, referring to 30-year fixed rate mortgages in general and not just FHA loans.
The times when rates drop like they have in 2019 make it very tempting for those buying or refinancing to dive in. But there is a very important area you need to check before committing even with the low rates being discussed at the time of this writing.
Your credit report.
FICO scores play an important part in home loan approval, and so does your debt ratio. If your FICO scores are within the right range, your loan officer can offer you a more competitive interest rate on your home loan and the recent headlines you have been seeing will be more applicable to you than if you come to the table with FICO scores that are considered marginal.
Yes, your FICO score affects the interest rate you are offered by the lender.
Do not underestimate the power you have to raise your own FICO scores without paying third parties to do it for you. When you are in the year leading up to your FHA loan application, make all your payments on ALL financial obligations on time. That goes a long way toward improving your credit score.
You should also cut your credit card balances to well under halfway to the maximum. This also helps your credit scores. And these are two of the top pieces of advice from consumer credit protection agencies.
The biggest thing we can learn from current headlines is that if you are coming to the home loan process after 12 months of taking the advice above, your potential to get a home loan at lower interest rates is greatly improved.
If you are just now starting to prepare for a home loan and you know your credit needs help, today’s lower interest rates may not be able to help you-you will have to wait out the current cycle until your payment record is solid and see what the interest rates are doing at that time.
There is no guarantee that mortgage loan rates will be the same tomorrow, next week, or next year. But for those who are not ready, the interest rates don’t really matter until you ARE ready for the loan application process.