Shopping multiple lenders for a “low mortgage rate” in California can sometimes save you 1/8 percent on your rate and/or a few hundred dollars in fees. However, when it comes to getting the best mortgage rate, you’re going to need more than good research skills.
You’re going to need some luck. You also need to analyze the cost benefit of your short and long term savings with buying the interest rate down or optiing for no points to buy the rate down.
Mortgage rates for people in the Southern California or anywhere else, for that matter, are unpredictable, ever-changing, and rarely change as expected.
For example, when the Federal Reserve left the mortgage market March 31, 2010, analysts said that mortgage rates would rise by a half-percent or more. It was practically stated as fact on TV. When April 1 came around, though, rates didn’t rise.
Instead, a volcano erupted and mortgage rates dropped on safe haven buying.
Then, a week later, as the volcano ash cleared, mortgage rates were supposed to resume their rise. Only they didn’t. Instead, a debt crisis emerged in the Eurozone and mortgage rates dropped.
Since March 31, conforming mortgage rates are lower by roughly 0.125 percent, according to Freddie Mac’s weekly mortgage rate survey. At today’s rates, the savings are roughly $20 per month per $200,000 borrowed — or $100 per month based on their original, post-March 31 forecast.
It brings us to one of the most important axioms in rate shopping: You can’t shop for good luck.
- On some days, rates go higher
- On some days, rates go lower
- On some days, rates stay the same
Occasionally, there are days when rates do all three.
As a home buyer or would-be refinancer, what rate you get often depends on at what time of day you do your shopping. Your best strategy is to work with a Mortgage Professional who has access to and tracks Mortgage Backed Securities daily and knows how to anticipate how the daily economic news will impact mortgage rates. (this is what I do).
You can’t predict what will happen next in mortgage markets — even just an hour from now. Therefore, the smartest move, sometimes, is just lock your rate now. At least that way, you’ve got a guarantee.