August 18, 2020
Mortgage loan interest rates have had some interesting ups and downs in August 2020, with conventional loans AND FHA mortgages staying below the three percent line, at least some of the time in the case of conventional loans.
There are many factors that affect the fluctuations of FHA and conventional mortgage loan interest rates–we won’t go into all of them here.
But the pandemic, politics, international trade issues, and investor reaction to all of these things and more have kept mortgage rates at unprecedented lows (no, we aren’t tired of writing that phrase just yet).
But at the time of this writing on August 18, 2020, conventional rates have risen above the three percent line once more.
Rates are reported at a best execution 3.12% for the most well-qualified borrowers. Yes, that’s higher than the sub-three percent range earlier in the summer, but the thing to note for readers of this blog?
The fact that FHA home loan interest rates have not followed suit. Yes, FHA rates have increased.
But they have not increased to the same levels as conventional mortgage rates–FHA and VA mortgage loan interest rates for a 30-year, fixed-rate mortgage loan are at a best-execution 2.38% for the most well-qualified borrowers.
As you can gather from the above, not all applicants will be offered that low 2.38%. Those who work on their credit in the year leading up to their loan application will fare better in the interest rate department, and you shouldn’t worry about today’s mortgage rates if you aren’t ready to fully commit to a loan application right now.
The future of mortgage rates is unclear. The pandemic, the election year, global trade, and other issues all leave big question marks. How can a borrower anticipate what the rates might be when they are finally ready to apply for the loan?
It’s not really possible to predict the future with rates, though there are things that can be anticipated in the short-term that may give a clue as to where things are going.
For example, certain economic reports (like jobs data, unemployment stats, and Gross Domestic Product numbers) that come out on a regular basis are anticipated by investors.
That can cause rate fluctuations, as well as other factors that aren’t expected or are not expected to play as much of a role (at first). Some investors and house hunters pay attention to something called a 52-week average for mortgage rates to get an idea of how they have risen and fallen over the 12 months specified in the average.
For example, the 52-week average rate for conventional 30-year fixed rate mortgage loans is at the time of this writing 2.81% at the low end and 4.15% at the high end.
That is a fairly wide range thanks to the sub-three percent mortgage loan rate, and that wide average may not be typical of a “regular year” unaffected by COVID-19 and other variables.
The 52-week average for FHA 30-year fixed rate home loans is at the time of this writing 2.25% at the lowest end and 4.0% at the highest mark. Will this 52-week range persist into the new year?
Only time will tell, but one thing is for certain; borrowers should expect tighter credit standards for rates as low as the ones FHA borrowers are seeing posted right now.
If your credit isn’t ready for your home loan, work on it until it IS ready for best results. You may find the current mortgage market is more competitive where FICO scores are concerned–you definitely want to have your credit at its best before you apply.
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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