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If you’re a homebuyer who has been patiently waiting for mortgage interest rates to fall — or a homeowner saddled with a high rate looking to refinance — the wait for relief may soon be over. The Federal Reserve is set to issue its first interest rate cut since 2020 this week and while that may not match up with a direct cut to mortgage rates, it will help move them in a downward direction. Combined with additional cuts to the federal funds rate likely for November, December and possibly even into 2025, both buyers and owners are now positioned to secure significant financial relief.
One of the best ways to find a lower mortgage interest rate is to shop around to compare rates and lenders. It’s easy to do so with rates listed both on lender websites and multiple offers listed in one location via online marketplaces. But when you’re shopping for mortgage interest rates it’s critical to know exactly what you’re looking at to accurately complete a lender comparison. So what should you be keeping an eye out for, specifically? Below, we’ll detail three things to look for when shopping for mortgage interest rates in today’s climate.
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What to look for when shopping for mortgage interest rates
While the mortgage interest rates you see listed online now and later this week may appear low, there are some things you should check to help verify what’s listed. Specifically, look for:
Mortgage points
Mortgage points serve as a fee the borrower pays to the lender to secure a below-average interest rate. These can be pricey (often 1% of the total mortgage loan) but can still be advantageous in the right scenario. That said, some lenders may have already preemptively included mortgage points in the rate they list on their website, thus making their offers appear lower than they are. You’ll need to agree to pay these points to get that offer. So be sure to look for any fine print or disclosures listed when shopping around to determine if this is the case. If so, the rate without the points included could be significantly higher than what you see.
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Lender profile
Another factor to consider when shopping for mortgage interest rates is the presumed lender profile the bank has for those doing their research. In other words, the rate you see listed may be for those with the most attractive lender profile possible. If you don’t have a clean credit profile and a score in the 800 range, then, what you see being offered may not be what you can get. So don’t be surprised if the rate you’re ultimately offered is significantly higher than what you saw listed online. And don’t hesitate to start working on your credit now so that you can better position yourself to secure more attractive rates and terms
The time the rate was posted
Mortgage interest rates change daily, except for weekends and holidays, so it’s critical to monitor them often. When you do, however, try to see if you can determine the exact time the rate was posted. For example, if you check mortgage interest rates on Thursday before an interest rate decision is formally announced, you may not be seeing a rate reflective of that adjustment. In this case, waiting to see how that cut has reverberated through the market could be worthwhile (in which case rate offers on Friday may be timelier – and lower).
The bottom line
Mortgage rate shopping is a critical component of the homebuying process but it’s equally important to complete a thorough and accurate search. This means understanding that the rates you see listed may not be what you’re ultimately offered as the public-facing rates often account for mortgage points and a specific lender profile. They’re also reflective of a specific time and date. This may not apply to all lenders, especially in today’s dynamic rate climate. But it’s something to look for to improve your chances of securing the most cost-effective rate and term available, particularly now with rate cuts looming.
Have more mortgage rate questions? Learn more here.