Mortgage rates have pushed higher each of the last four weeks. For a 30-year loan term, they’re now up around 5%1 and are expected to soon push through that level.
The Federal Reserve is expected to raise its benchmark interest rate two more times this year, with the next increase coming at the conclusion of their meeting on Wednesday.
With no reason to think that the current trend toward upward mortgage interest rates won’t continue, it makes sense to take advantage of these interest rates while you can. If you’re in the market to purchase, you may be under the impression that you need to find a house before you can lock your rate. However, with RateShield™ Approval2, you can now lock your rate for up to 90 days while shopping for a home. If rates end up pushing higher by the time you have purchase agreement, you get to keep the rate you locked. If they’re lower, you get the lower interest rate while you wait to close.
We’ll get into the details below, but before we do, let’s talk about why you might want to take advantage of the current interest rate environment now before rates rise.
Where the Market Is
In the mortgage market, all signs point to higher rates in the near future. The 10-year U.S. Treasury note recently breached the 3% level. Although it’s not set in stone, the rate on a 30-year fixed mortgage tends to run around 2% higher than this key treasury rate.
In addition to this, as mentioned above, the Federal Reserve has its own benchmark interest rate that controls short-term lending. This short-term borrowing rate has been increased seven times since the end of 2015 and currently sits at a level of 1.75% – 2%. The target range is expected to increase by another 0.25% at the conclusion of the next meeting of the Federal Reserve Open Market Committee on Wednesday.
Although there’s not a direct relationship between interest rates for longer-term loans like mortgages and these shorter-term borrowing rates, there’s a very positive correlation that when short-term rates go up, longer-term rates tend to increase as well.
While there’s no guarantee, many market participants also expect the Fed to increase short-term interest rates in December as well.
If you can lock your rate, it’s certainly a good time to do so.
For clients who want rate certainty, RateShield Approval can provide it.
RateShield Approval allows you to lock your rate for up to 90 days while shopping for a home. Once you’ve found the new home you desire and have a signed purchase agreement, we compare the rate you locked with current rates. If rates are higher, you get to keep the rate you locked. If they’re lower, you get that lower rate while you complete the rest of the purchase process and move forward to the closing table. It’s a win-win!
You qualify to get a RateShield Approval, available on 30-year conventional, FHA and VA loans, by first getting a Verified Approval. You get this by sharing your income and assets with us to qualify you up front. There are also other benefits to Verified Approval. Because we have documentation on your income and assets, we’re able to really stand behind your mortgage approval. If you get an offer accepted with our letter and your loan doesn’t close through no fault of your own, we’ll give you $1,0003 .
The fact that your documentation is verified and we put our money where our mouth is means you can make your offer with the full confidence of a cash buyer. You’ve got your financing secured.
Even better, if you lock your rate now, that 90-day period will take you through the end of the year. No matter what happens in December, you would be locked in with today’s rates.
Does this sound good to you? You can apply online with Rocket Mortgage® by Quicken Loans. One of our Home Loan Experts would also be happy to help you get started if you give us a call at (800) 785-4788. If you still have questions, you can let us know in the comments.
1 According to interest rates published on September 20, 2018, on FreddieMac.com.
2 RateShield Approval locks your initial interest rate for up to 90 days on 30-year conventional, FHA and VA fixed-rate purchase loan products. Your exact interest rate will depend on the date you lock your rate. Once you submit your signed purchase agreement, we’ll compare your rate to our published rates for that date and re-lock your interest rate at the lower of the two rates for an additional 40 to 60 days. Quicken Loans reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Quicken Loans. This is not a commitment to lend. Additional conditions or exclusions may apply.
3 Participation in the Verified Approval program is based on an underwriter’s comprehensive analysis of your credit, income, employment status, debt, property, insurance, appraisal and a satisfactory title report/search. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Quicken Loans’ control, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close, you will receive $1,000. This offer does not apply to new purchase loans submitted to Quicken Loans through a mortgage broker. Additional conditions or exclusions may apply. Verified Approval within 24 hours of receipt of all requested documentation.
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