Prices are low! Mortgages cheap! But you can't get one (2024)

FAQs

Why are mortgages so cheap? ›

Mortgage rates have fallen as the Federal Reserve cut interest rates for the first time since the financial crisis last month, and the 10-year Treasury yield fell to its lowest level in nearly three years this week.

On the other hand, if you lock your rate and interest rates fall, you can't take advantage of the lower rate unless your rate lock includes a float-down option.

In some cases, it can make sense to invest extra money – in hopes of earning a higher return – rather than using it to pay down the mortgage. "Very simply, if your mortgage rate is, say, 3% and you can earn more – like 5% – on your money, it makes financial sense to keep the mortgage," Randall says.

You can't unlock your mortgage rate after locking. But there may be other ways to get a lower rate after you've locked. However, the agreement works both ways. If rates suddenly fall, you can't just back out of the rate lock and expect your lender to offer you a lower interest rate.

It's gotten notably harder to get government-backed mortgages—including FHA loans, which are supposed to make buying a first home easier—but lending standards have gotten stricter across the board. (Mortgage availability has been trending lower since 2019, but it fell almost 5% in December alone.)

Trends and conditions in the housing market also affect mortgage rates. When fewer homes are being built or offered for resale, the decline in home purchasing leads to a decline in the demand for mortgages and pushes interest rates downward.

Yes, you can negotiate mortgage rates. This holds true whether you are a first-time home buyer securing your first mortgage loan or a seasoned homeowner looking for a lower rate with your current lender.

Average 30-year mortgage rates are back down to the mid-6% range, according to Zillow data. Recent economic data suggests rates could fall further later in 2024. In spite of earlier forecasts predicting that they'd trend down throughout 2024, mortgage rates have remained elevated so far this year.

If you think rates are likely to stay the same or increase, you might be better off locking. But again, no one ever really knows for certain what the rates will do, so you must be willing to accept the risk if you choose to float. If uncertainty keeps you up at night, locking is definitely the better option.

If you pay $200 extra a month towards principal, you can cut your loan term by more than 8 years and reduce the interest paid by more than $44,000. Another way to pay down your mortgage in less time is to make half-monthly payments every 2 weeks, instead of 1 full monthly payment.

Can you still get 3% mortgage? ›

Assumable mortgages are rare but allow buyers to take over a seller's existing debt, offering an avenue to secure lower borrowing costs.

If rates drop enough, a float down policy will come into play as an option. You can float your rate down after your rate lock only if the following scenarios apply, and it would cost a 0.5% hit to your closing costs (0.005 x Loan Size) to utilize the float down.

If you're nearing the end of the mortgage rate lock period and need more time to close on your home, you can pay for a rate lock extension.

You can choose to lock in your mortgage rate from the moment you select a mortgage, up to five days before closing. Locking in early can help you get what you were budgeting for from the start. As long as you close before your rate lock expires, any increase in rates won't affect you.

Simply put, many traditional lenders use antiquated, fragmented processes that take a lot of time and people power. At Better, we've built technology to streamline the entire homebuying and mortgage process, making it cheaper for us to make the loan which means we can then pass the savings on to you.

The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025. However, recent economic developments have led some forecasters to believe that rates will remain elevated at around 7% for the remainder of this year.

Because 15-year loans are less risky for banks than 30-year loans—and because it costs banks less to make shorter-term loans than longer-term loans—a 30-year mortgage typically comes with a higher interest rate.

just over 78% of borrowers have a rate below 5% while 59.5% have a rate below 4%. Those lucky enough to have an interest rate below 3% fall to 22.6% of homeowners, Redfin reports. With lower mortgage interest rates than current averages, it's easy to understand why homeowners are weary of selling.