If you pay attention to the news, you've likely noticed there's been a lot of talk about mortgage rates in recent years. While mortgage rates may not be as high as they were in the 1970s and 1980s, they're still considered to be higher than average. Unfortunately, the higher mortgage rates are, the more you'll pay for a house.
It can be confusing for first-time and even seasoned homebuyers to understand mortgage rates in the Milwaukee area. This blog will discuss what mortgage rates are and how they impact the housing market.
What Are Mortgage Rates?
Mortgage rates refer to the interest percentage that gets charged when you take out a home loan. Other terms for mortgage rates include:
- Interest rate
- Mortgage interest rate
This fee is a component of what it costs for you to borrow money from a mortgage lender. Home buyers don't pay lenders a lump sum when they purchase a house. Instead, they pay the interest on their mortgage as part of their monthly payment.
Types of Mortgage Rates
There are several elements you should consider when buying a home. Some of the things that can affect your mortgage interest rate include:
- Type of mortgage
- Your loan term length
Mortgage rates typically fall into two main categories.
Adjustable-Rate Mortgage (ARM)
An ARM comes with a fixed introductory rate. Your mortgage rate will stay the same for a pre-determined time, such as five to seven years. After that, your rate may periodically change.
A few factors to keep in mind when exploring this type of mortgage rate include:
- Your monthly payment could majorly increase
- Rate caps are in place to limit how high your rate could go
Fixed-Rate Mortgage
One of the great things about a fixed-rate mortgage is that you have a consistent interest rate for the length of your loan. Your monthly interest and principal payments will be the same each month. Keep in mind that this interest rate is typically higher than the initial rate for an ARM.
Factors That Affect Mortgage Rates
Your financial situation isn't the only thing that'll determine what interest rate you qualify for. Many external economic factors can dictate current mortgage interest rates, including:
- Employment rates
- Economy strength
- Federal Reserve
- Housing market conditions
- Inflation rates
- Bond and stock markets
Unfortunately, these factors are outside your control. You can improve your financial factors, like decreasing your debt or improving your credit score.
Exploring Mortgage Trends in 2024
Thankfully, mortgage rates have started to decrease in recent months. Some homeowners can get a 30-year mortgage with a 6.48% interest rate. Mortgage rates may not be as low as homeowners would like, but they're still slightly dipping down.
Get Help Understanding Mortgage Rates With PMI of Greater Milwaukee
Understanding mortgage rates is the first step to making educated financial decisions when purchasing a home. While mortgage rates continue to change, there are ways to explore when there will be interest rate cuts.
If you're looking for more mortgage rate insights or help with determining how much your home is worth, the team at PMI of Greater Milwaukee is here to assist. We offer a wide range of services, including assistance with finding resources for homebuyer finance. Contact our office to schedule a meeting.
