How to navigate rising mortgage rates

We’ve been spoiled by ultra-low mortgage rates for the last several months. We saw 30-year mortgage rates go down into the mid two’s on conventional and government loans. These interest rates were brought on by the pandemic, the job market uncertainty, and the broader United States being in a holding pattern about what’s going to happen with the broader economy. Doom and gloom throughout 2020 along with lack of consumer optimism help contribute to ultra-low mortgage rates. Adding in as to who would win the presidency which created further uncertainty in the markets helped drive rates lower. Fast forward to 2021, there is a new administration and ongoing talks about the new stimulus plan. This new stimulus is promoting concerns of inflation within the economy and as a result, both stocks and bonds are feeling the pain of an inflationary environment or rather a potentially inflationary environment. As such, mortgage-backed securities are deteriorating pushing mortgage rates higher. Here is how to handle the present situation with regards to mortgage rates…

We are in an environment right now where there’s still a ton of leg work that has to happen in order for the economy to get back to a positive state. Covid-19 is still a broader concern for the United States, as is the vaccinations, consumer optimism is not at peak levels yet, the job market is stagnating, these things in combination with any further negative economic information that is inevitably going to come out of this environment probably will keep mortgage rates relatively low historically speaking simply put here’s how the math plays out.

Let’s say you where you were looking at a $400,000 mortgage a few weeks ago at 2.75%. Now you’re looking at that $400,000 mortgage at 3.25%. The .5 difference in rate translates to $108 a month of payment, $108 a month of payment can be offset by paying off a credit card for example, or another type of consumer loan. So the name of the game right now if you’re buying a home is to just breathe and relax. Let the loan officer you’re working with qualify you at a higher rate than what the prevailing market rate would be to hedge against mortgage rate movement-plan worst-case hope for the best and come out somewhere in between. Remember interest rates are cyclical in nature, the rise we have in mortgage rates more than likely is going to be temporary and we’re going to be poised for a bounce followed by a subsequent trend back down, as a byproduct of a bleak outlook for the economy.

Just this week the Federal Reserve came out and said they’re going to keep interest rates low for the future which is a signal they’re not optimistic the economy is out of the woods. Remember when there is negative economic information coming out that is typically good news for mortgage rates if it’s not inflationary, right now we have both. Inflation is the arch-enemy of stocks and bonds. If you’re refinancing the opportunities would be to pay off debt, do home improvement, go from 30-year to 15-year terms, drop monthly PMI, and consolidate debt.

The best strategy would be to get your mortgage application in now.  Work with a lender who specifically understands the markets and can articulately explain when the best time to lock or float your interest rate is. You need to be looking for a mortgage professional who has a good price but is also advice-driven and understands the nature of what’s transpiring with the markets and can properly advise you both from an economic standpoint as well as a financial standpoint. Not all loan officers are created the same-think about that next time you’re applying for a mortgage.

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When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

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