As you may have heard, the U.S. Federal Reserve slashed interest rates last month, causing many to question whether the interest rates for home mortgage loans had also dropped. The answer? Not quite.
While the interest rates set by the Federal Reserve do influence the rates you can get on your mortgage, the two don’t always align. As stated by NerdWallet, mortgage rates and the Fed’s short-term interest rates tend to follow one another like "dance partners;" yet the two are still independent of each other and can "dance" in opposite directions.
Mortgage rates rely on several different factors, some of which borrowers have control over and others which are subject to outside influences. Actions takes by the Fed are one of those influences alongside the rate of inflation, job growth, and the overall state of the economy.
How to Ensure Your Mortgage Rate is as Low as Possible
But borrowers also have some control over the interest rate on their mortgage loan. Higher credit scores, lower loan-to-value ratios, and lower debt-to-income ratios can help borrowers lock in a lower interest rate.
More detailed advice for prospective home buyers, especially those with existing debt, can be found in our previous On the House blog post: Top 3 Tips for Buying a House with Student Loan Debt.
At the end of the day, knowledge is power. If you’ve been on the hunt for a new home, let your new understanding of mortgage interest rates guide your way through the home buying process.
If you’re interested in learning more about buying a home, we recommend visiting our step-by-step guide or checking out our homeownership page, which includes information on home buyer education courses, how to find a lender and REALTOR®, and how to use TSAHC’s down payment assistance programs.
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.