Stepping into the housing market can be intimidating at any time, but that’s been especially true over the last two years. Not only do housing prices continue to rise year over year, but the market has become incredibly competitive.

No matter how crazy it may sound, folks aren’t exaggerating when they say their home had multiple offers over asking price within hours of listing.

So, how did we get to this point and how can you secure a home loan? Lucky for you, we’ve got some tips and tricks for navigating this hot market, as well as a few tips and best practices for securing a home loan.

What’s an average mortgage rate?

At the start of the pandemic, mortgage rates were in a total freefall. Some folks were securing loans with interest rates as low as 2% – wild, right? Fast forward to now, we see the average mortgage rate is consistently rising.

While we may be seeing a steady increase since those historic pandemic lows, interest on a 30-year fixed mortgage rate is currently hovering somewhere between 5 and 6 percent. If you’re a homeowner debating whether or not to sell for a new property or take out a loan for remodeling, the average interest rate for a home equity loan in 2022 is somewhere between 4 and 6 percent.

What impacts interest rates?

When it comes to interest rates, there are many factors at play:

• Inflation
• Economic growth
• Federal Reserve’s monetary policy
• Bond and housing markets

How do home loan interest rates impact buyers?

As home prices and interest rates continue to rise, some buyers are beginning to feel the pressure to make a move while rates are still relatively low. With a lower interest rate comes lower monthly payments and an overall lower cost on your investment. What’s not to like about that?

At the end of the day, there is no wrong time to buy if you have the financial means to do so, and you can always reach out to a loan officer if you’d like to learn more.

What can first-time buyers do to secure a lower rate?

There are steps you can take before beginning the mortgage process to ensure you get the lowest home loan interest rate possible.

1. Ensure your financial health is in order.

• Improve your credit score.
  Lenders view an applicant’s credit score as a way to gauge lending risks. If they see a low score, they could dismiss your application entirely, or offer you loans with high interest rates. Turning your credit score around isn’t an overnight fix, but there are steps you can take to improve your credit score over time.
• Work on your debt-to-income ratio (DTI).
  Your DTI is the amount of money you owe to creditors compared to the amount of money you earn. Much like your credit score, your DTI serves as another risk indicator for lenders. A DTI of 36 percent or lower is considered good, while 43 percent and above can interfere with your ability to secure a loan. Once you’ve identified your DTI, you can explore options to improve it.
• Save up for a down payment.
  If you can manage a 20 percent or more down payment, you’re more likely to get a lower interest rate while also reducing your overall cost to borrow — it’s a win-win. If a 20 percent down payment isn’t in the cards for you at this time, there are loans you may qualify for with as little as three percent, just don’t forget to save for closing costs.

2. Calculate a budget that works for you.

Not sure where to start? We have plenty of mortgage calculators that factor in loan amounts, loan terms, and interest rates to show what your monthly payments could look like.

3. Get familiar with your options.

At nbkc, we’re here to help navigate you through VA home loans, pilot loans, mortgage points and everything in between. Our experienced loan officers will gladly help you find the right loan for you. Get to know some of your options.

4. Gather the necessary documents.

There are a few standard documents you’ll need to gather for your application, including:

• Pay stubs, W-2s, or other proof of income
• Tax returns
• Proof of employment and employer contact information
• Bank statements, and proof of assets (stocks, bonds, and savings statements)
• Residence history
• Proof of any additional income
• Earnest money and down payment source

Some lenders keep it old school and request physical copies, while others accept online submissions — just like your friends at nbkc. Our online application portal makes it easy for applicants to upload their documents while keeping sensitive personal information safe.

5. Find an experienced loan professional to work with.

Last but not least, shopping around for an experienced mortgage lender is a surefire way to find the best rate in any market.

Options for current homeowners

Not interested in buying a new home? Refinancing is a great option, and there are a few ways you can do just that.

Refinance your adjustable-rate mortgage (ARM) loan to a fixed-rate mortgage.

When you do this, you’ll be making consistent principal and interest payments each month.

Change your existing ARM to another ARM with different terms.

The Federal Reserve Board recommends looking at ARMs with low interest-rate caps because their limits prevent your mortgage payments from increasing past a certain amount.

Negotiate your fixed-rate mortgage to a lower interest rate.

Say you're in a better financial situation than you were when you first signed your loan, there’s a chance you could negotiate your fixed-rate mortgage to a lower interest rate – you may even be able to renegotiate the length of your loan to better suit you.

How can nbkc help you find the right rate?

When we say we want the best for you, we really mean it.

At nbkc, we take the time to get to know you, your financial situation and homeownership goals. Our lenders are experts in comparing loan programs, and will go above and beyond to provide borrowers with the best interest rates possible.

From initial conversations to closing, nbkc is there for you every step of the way. With an average of 10+ years in the mortgage industry, you’re in great hands.

Ready to find a rate that works for you?

Navigating the housing market can get a little tricky at times, but hey — that’s what we’re here for, and hope you feel better prepared to start this journey. We encourage you to continue your research, explore your options and search for a lender that will help you along the way.

If you’re interested in working with us, visit our home loans site to learn more. Or, you can reach out to a loan officer if you have any questions. We’d be happy to help.