Trying to Time Your Home Purchase? Follow These 7 Mortgage Rate Tips
Making the decision to buy a home can be a big leap of faith. Especially when you want to get the best purchase price and mortgage rate. How do you know when it’s time to make your move?
Many homebuyers try to plan their purchase around mortgage rates. But they can’t predict when they’ll get the best rate for their home loan. Rates can change by the minute, depending on what’s happening in the treasury market and how bonds are trading for mortgage-backed securities.
So, instead of timing your purchase according to rates, it’s important to focus on negotiating the best deal with the seller while also taking steps to ensure you can get the best deal when it’s time for a mortgage.
We’ve rounded up those tips for you, as well as more in-depth details about how mortgage rates work.
7 Tips To Get the Best Deal on Your Mortgage
Here are tips from our in-house mortgage experts to help you get the best deal on your upcoming mortgage.
1. Seek out a low-cost lender.
Don’t forget to think about your upfront mortgage costs. Many are out-of-pocket and should be considered when you create your homebuying budget.
One way to minimize the cost is to find a low-cost mortgage lender, like Axos Bank. We offer a $0 lender fee to help you save on your home purchase.
2. Get pre-qualified for your mortgage.
A mortgage pre-qualification is a great way to gauge your compatibility with a lender. This can save you time and money when it’s time to lock in your loan.
Keep in mind that a pre-qualification isn’t the same as a preapproval. Check out our Not All Preapprovals Are Equal article to learn about the differences.
3. Sign up for mortgage rate alerts.
Once you find a lender that’s a good fit, ask if they offer mortgage rate alerts. This gives you better visibility into potential rate drops.
For example, Axos Bank offers a free Rate Watch service. When you sign up, you can select to get emails on a specific frequency or when rates hit a specific number.
4. Act fast when rates drop by getting preapproved.
Mortgage rates can change quickly. The best way to lock in a rate before it changes is to already be preapproved for a mortgage. You’ll have already submitted your necessary paperwork and details and the loan team will have completed their underwriting so they can secure the rate before it changes.
5. Ask for seller-paid rate buydown or closing costs credits.
As known as paying points, a rate buydown helps you lower your mortgage rate. You can negotiate to have the seller provide a credit toward the buydown, which can potentially result in more up-front savings than asking for a purchase price reduction. This depends on how long you plan to keep the loan. If you’re considering a near-term refinance, then a lower purchase price may be a better option.
Another alternative is to use a seller credit toward your closing costs.
6. Avoid taking on new credit when you’re shopping for a home.
Recent loan applications and new debt can affect your credit score, which is one of the factors used when determining a mortgage rate.
Once you’re within 60 days of your potential purchase, start limiting your other credit applications. This includes applying for vehicle loans, credit cards, and other types of debt, like furniture store financing.
7. Watch your revolving debt balances.
Your credit card and other revolving debt can also influence your credit score. Aim to keep balances at or below 40% of your available credit limit to help optimize your score.
There are additional credit considerations that can also factor into your loan. Review our article Home Loan Basics: Credit Considerations to learn more.
Learn More About Mortgage Rates
Unless you work within the mortgage industry, you likely don’t know many details about how mortgage rates work. We welcome your questions! Here are some of those frequently asked questions. We hope the answers help you navigate your future home purchases.
How do I determine my mortgage rate “sweet spot”?
Because it’s hard to pinpoint when interest rates will hit their low, it’s best not to hold out for a specific rate. Instead, our experts recommend that you evaluate your situation.
Do you need a large amount of money for a property purchase, major project, or to pay off higher-rate debt? If so, then the current market rate is your sweet spot. That’s because mortgages are often the cheapest solution if you need a loan.
Ultimately, it depends on broader financial market conditions, your overall cost of debt (the blended rates of your loans), your debt-to-income (DTI) ratio, and your overall financial situation.
That’s a lot of information to consider – reach out to our mortgage team at 888-546-2634 if you’d like help running the numbers.
What does it mean to lock a mortgage rate?
Once you’ve submitted a full mortgage application, your lender can lock in your rate. This means the bank is committing to delivering the loan at that rate, regardless of what happens in the market. This protects your pocket if rates go up before your loan closes.
Axos Bank offers a variety of rate lock timeframes – typically 30 to 60 days. For a home purchase, the offer must be accepted to get the lock, and the timeframe typically aligns with the length of the contract.
Is it worth paying points for a lower interest rate?
Because you can’t predict when rates will be at their lowest, it’s great to take advantage of other ways to reduce your costs.
When you pay points, you’ll receive a lower mortgage rate for the life of the home loan. The discount points will show as a fee on your loan estimate. You’ll need to bring the cash to closing. Due to the up-front cost, you’ll want to keep the loan for as long as possible if you plan to go this route. Or at least keep it for the time that it takes to recoup that initial investment.
What is rebate pricing for mortgages?
Rebate pricing is the opposite of paying points. Instead of paying to receive a lower mortgage rate, the lender provides you a cash credit to offset your closing fees and you receive a higher than market rate.
If you plan to do a future mortgage refinance, this is a great option to get a “no-cost loan.”
Remember, Rates Aren’t Everything
There’s truth behind the maxim: Date the rate, marry the home. If you find a home that you truly love, don’t let a higher rate stop you from your homeownership goal.
Keep in mind that a home is a long-term investment – once rates go down, you’ll have the opportunity to refinance and save. When that time comes, the Axos Bank mortgage team will be here to help you optimize your rates.
Trying to Time Your Mortgage? Follow These 7 Mortgage Rate Tips
This blog was published by Axos Bank on August 9, 2023, and last updated on August 9, 2023.