August 4, 2020
Mortgage loan interest rates have been moving lower in 2020–so low that even seasoned market watchers are surprised by how low the rates have gone.
When mortgage loan interest rates fell below the three percent zone for both conventional and government-backed mortgages like FHA loans, it was a significant moment.
The 52-week average (low) for a 30-year fixed-rate jumbo loan fell as low as 3.25%, but the same 52-week average for a “normal” conventional loan (not a jumbo) was 2.86% at its lowest point in that date range.
Fairly impressive, until you compare the same 52-week low to the FHA 30-year fixed-rate mortgage, with a current 52-week low of 2.30%, thanks to the numbers falling from 2.37% last week to 2.30% this week.
Pretty amazing rates, and opening the month of August with them is a real boon to some house hunters. But which ones?
Let’s start by examining some basics. The low rates you see here are not advertised as being offered to all applicants–these rates are for extremely well-financially qualified borrowers.
But low rates affect all transactions so while a borrower who has a lower credit score may not qualify for the very lowest rates, in today’s environment you could find yourself getting a cheaper loan than those who applied from this time last year.
Borrowers with a solid loan repayment history (no lates or missed payments) are often given a better interest rate; the same goes for those who have good FICO scores in combination with the no late or missed payments issue.
Borrowers are also offered more competitive interest rates when they do not over-utilize their credit card accounts. Carry balances well below 50% of the limit for best results.
What you need to know about credit scores, interest rates, and your home loan isn’t limited to those issues about your FICO scores.
You will also need to remember that you are seeking a loan in a time when interest rates have created a larger demand for certain kinds of lending. You may find yourself in competition for your lender’s time.
Those who have marginal FICO scores should consider their scores part of that competition and start working on their credit accordingly. You can begin credit monitoring, start an aggressive campaign to pay on time and reduce your debt levels, etc.
Lenders who aren’t as inclined to give you the most competitive interest rates can be swayed by other factors including the ability to make a larger down payment, large cash reserves, and other compensating factors.
If you worry about your credit score and your ability to qualify for an FHA loan, consider saving more money for your down payment–the ability to make a 10% down payment can help move the loan decision closer to your favor.
It may take more time to save for a down payment, but don’t forget you may have local resources such as a local down payment assistance program or home buyer grant in your area–ask your lender, Real Estate agent, or other real estate professional if they are familiar with such programs near you, or you can search online for a program in your state.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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