If you’re in the market for a new home, you’re likely applying for a mortgage. One key factor in determining exactly what you’ll pay from month to month is the interest rate itself, which likely leaves you wondering about current Florida mortgage rates. With so many options and fluctuations in the market, it’s hard to know where to begin. But fear not! We’re here to help guide you through the process and provide you with the information you need to make an informed decision about your mortgage rates.
In this blog, we’ll explore everything you need to know about FL mortgage rates, from what they are to how they’re determined, and what factors can impact them. So, let’s get started!
How Are Mortgage Rates Determined
Mortgage interest rates actually depend on a number of factors, including those that rely on you (the borrower), the loan you’ve applied for, and the current economic climate. Lenders use these factors in various combinations to understand how risky the loan is and to set an appropriate interest rate.
Factors You Control
You control more factors than you might imagine when it comes to your mortgage interest rate. One of those factors is your credit score. In most cases, borrowers who have fairly high credit scores are offered lower interest rates, while those with lower scores may be charged a higher rate. While there is no set credit score required to get a good interest rate on a mortgage, having a score in the “excellent” range (generally considered to be 750 or higher) can increase your chances of securing a favorable rate.
The total amount you borrow affects the interest rate as well, with larger loans sometimes carrying a higher rate. This is because larger loans represent a greater risk to the lender and require more capital. Keep in mind that you can change the loan amount by paying a higher deposit at the outset, thus possibly qualifying for a lower interest rate. Often, the larger the down payment, the lower your interest rate will be. This is because a larger down payment reduces the lender’s risk and shows that you are a responsible borrower. Additionally, a larger down payment can also keep your monthly payments lower and help create equity faster.
How you plan to use the home can also affect your interest rate. Lenders want to know whether the home will be your primary home, your vacation home, or a property you intend to use as an investment. If the home will be your primary residence, you’re likely to qualify for lower interest rates because lenders believe you’re more likely to make your payments on time because you don’t want to lose your home. Second homes and investment properties, though, don’t always qualify for the same interest rate cuts, as lenders consider these riskier properties.
The Type of Loan
Both the type of mortgage you choose (fixed vs. adjustable) and the length of the loan (15 years vs. 30 years) can all impact your interest rate.
A fixed-rate mortgage will have a set interest rate for the entire duration of the loan, while an adjustable-rate mortgage (ARM) will have a variable interest rate that can change over time. Generally, fixed-rate mortgages are considered safer and more predictable, while ARMs may offer lower initial rates but can be riskier in the long run. So, while your payment may be lower on an ARM initially, it can change. With a fixed-rate mortgage, you lock in the interest rate for the life of the loan.
The length of the loan also impacts your interest rates. Generally, longer loan terms will have higher interest rates compared to shorter loan terms. For example, a 30-year fixed-rate mortgage will typically have a higher interest rate than a 15-year fixed-rate mortgage. This is because the lender is taking on more risk by loaning money for a longer period of time.
However, a longer loan term can also result in lower monthly payments, which may be more manageable for some borrowers. Ultimately, it’s important to consider the trade-offs between obtaining a lower interest rate and getting more favorable loan terms when choosing a mortgage.
It’s important to understand how each of these factors might affect not just what you pay from month to month, but also what you’ll pay over the life of the loan. Fortunately, it’s easy to do your research thanks to the mortgage calculators on various lenders’ sites. Once you begin playing with the numbers a bit, you can shop around to ensure you’re getting the best rate possible for your unique financial situation.
Mortgage rates are also influenced by the state of the economy, with rates increasing during periods of economic growth and decreasing during periods of economic decline. Mortgage rates and inflation are related, with rates increasing when inflation increases and decreasing when inflation decreases.
Changes in the Federal Reserve’s monetary policy are similarly affected during periods of economic growth and recession, and that plays a role in the mortgage market too. There is a common misconception that the Federal Reserve (the Fed) is responsible for setting mortgage rates, but this is not true. However, the Fed does have an influence on rates. By controlling short-term interest rates, the Fed can adjust rates according to the state of the economy.
While mortgage interest rates aren’t actually linked to the Fed rates, the prime rate for mortgages tends to follow suit shortly after the Fed rate changes. The Fed lowers rates if the economy is struggling, which affects the rates at which banks can borrow money to lend to consumers. Conversely, when the Fed needs to tighten up the money supply, they raise the Fed rate, which eventually causes banks and lenders to raise their rates as well to keep up with their borrowing costs from the Fed.
The bond market plays a role as well. Mortgage rates are linked to mortgage-backed securities, which are collections of mortgages that are sold in the bond market. The demand for bonds affects mortgage rates, as high prices lead to lower rates, and lower prices lead to rate decreases.
Other factors including the Secured Overnight Financing Rate (SOFR) and the Constant Maturity Treasury (CMT) rates. The SOFR is an interest rate that determines a mortgage’s base interest rate based on the cost of overnight borrowing for banks. While it is not directly tied to mortgage rates, changes in the SOFR can indirectly impact mortgage rates.
If the SOFR increases, banks may need to raise their mortgage rates to maintain profitability. However, the impact of the SOFR on mortgage rates is typically modest and may be overshadowed by other factors, such as the state of the economy and inflation. CMT rates are used to calculate the average yield of various U.S. Treasury securities with different maturity periods and are used to determine interest for adjustable-rate mortgages (ARMs).
FL Mortgage Rates Vary By Lender
While all of those factors certainly affect FL mortgage rates, the lender you select also changes the rates you may pay. How do you find a lender with current Florida mortgage rates that work for you?
Initially, you’ll need to choose between a mortgage broker and a lender. Unfortunately, there is no one-size-fits-all answer to this problem. It ultimately depends on your specific situation and preferences. A mortgage broker can offer you access to more lenders and different loan options, potentially resulting in better rates and terms.
However, working with an individual lender may offer more personalized service and a greater sense of security. It’s important to do your research and weigh the pros and cons of each option before making a decision. Don’t hesitate to ask for recommendations and schedule meetings with both brokers and individual lenders to determine which option is the best fit for you.
Once you’ve made that selection, you’ll want to find the broker or lender that works for you. First, ask for recommendations from friends and family members who have recently purchased a home. They may be able to recommend a lender or broker who they had a positive experience with. Next, do your research online and read reviews from other customers. Look for a lender or broker who has a good reputation and offers competitive rates. Finally, schedule a meeting with a few different lenders or brokers to discuss your options and ask any questions you may have. This will help you determine which is the best fit for your needs. Remember, it’s important to work with a lender or broker who you trust and feel comfortable with.
Work with Synergy Homes
At Synergy Homes, we know how powerful the perfect mortgage with a great interest rate can be. We can’t wait to help you find the ideal home to go with that mortgage, no matter what current Florida mortgage rates may be. Contact us today to tour our model homes and select the right model to meet your needs.