Even with this jump, today’s mortgage interest rates remain favorable compared to historical mortgage rates. However, many experts expect mortgage rates to rise in 2021, and this week we saw the biggest week-to-week increase since Feb. 2021. “This illustrates why time is of the essence when considering refinancing,” says Greg McBride, chief financial analyst at Bankrate. “A sudden move in rates can erode some of the potential savings.”
If you haven’t refinanced yet or are considering purchasing a home, now is still an excellent time to lock in a good deal. Even though rates have increased, we may see them level off, McBride says. Rates are higher than they have been in recent months but still lower compared to April’s high of 3.18%.
Regardless of where rates are trending, the most important step you can take to ensure you get the best possible deal is to shop around.
It’s Important to Compare Mortgage Rates Between Lenders
There is a lot that factors into a lender’s rate quote, including:
- Credit score
- Loan-to-value ratio (LTV)
- Down payment amount
- Loan amount
- Length of the loan
- Type of mortgage
Most of what impacts the interest rate you’re eligible for isn’t something you can change quickly. Building your credit score or saving for a bigger down payment takes time. You could opt for a 15-year fixed-rate mortgage, which typically comes with a lower interest rate. But 15-year loans have much higher monthly payments.
For the average borrower, the best move you can make in the short term is to shop around for the best mortgage lender for your situation. The difference in interest rates between the most and least expensive lenders could be around 0.75%, according to a report by the California-based fintech startup Haus.
“People don’t shop around because they believe that [rates are] fixed,” says Dr. Vivek Sah, director of the Lied Center for Real Estate at the University of Nevada, Las Vegas. In reality, every lender evaluates your situation differently. Dr. Sah recently closed on a cash-out refinance and says he found a rate 0.50% lower by getting quotes from more than one lender. You will lose a lot of money if you don’t shop around, he says.
How to Find the Best Mortgage Rate and Overall Offer
Finding the best overall mortgage offer isn’t as simple as calling a lender and answering a few basic questions over the phone to get a rate quote. Until you submit an application, the quoted interest rate is, at best, an educated guess and can change.
Once you’ve applied, you’ll have your credit reviewed, and the lender will verify your income, assets, and debts. With all of this information, you’ll receive a more accurate quote on your interest rate and an estimate of what your closing costs will be. You can find this information on your Loan Estimate, which is a standardized form the lender is required to provide within three business days from when you applied.
On page one of your Loan Estimate, you can find your interest rate, whether or not it is locked in, and how long the rate lock will last. The fees you’ll pay for the loan are also very important. You may be quoted a stellar rate, only to be saddled with thousands of dollars in extra fees. Page two of your Loan Estimate details your loan costs, making it easier to compare those fees between lenders.