What Happens to Mortgage Rates When the Fed Makes a Move?
What Actually Impacts Your Mortgage Rate?
When you sit down with a lender to talk about your home financing needs, your mortgage rate will depend on factors more personal than Federal Reserve policy, such as:
- Credit Score – Stronger credit scores typically qualify for better pricing.
- Home Price & Loan Amount – Jumbo vs. conforming loans can carry different rates.
- Loan Term – A 15-, 20-, or 30-year loan makes a difference.
- Rate Type – Fixed or adjustable rates come with different considerations.
- Loan Program – Conventional, FHA, VA, or USDA loans each have unique pricing (and yes, we offer all of these financing options).
- Points vs. No Points – Paying “points” upfront can lower your rate.
Points and Buydowns: Lowering Your Rate
One of the most important conversations you can have with your lender is about buying down your rate with points.
A “buydown” means paying an upfront fee at closing (called discount points) to secure a lower interest rate—and with it, lower monthly payments.
When it makes sense to buy points:
- You’ll stay in your home long enough to reach the “break-even” point.
- You have extra cash available and want a better return than keeping it in savings.
- You want more buying power by lowering monthly payments.
- Rates are higher, and locking in something more manageable appeals to you.
When it doesn’t make sense:
- You plan to sell or refinance before the break-even point.
- You expect rates to drop soon.
- You need your cash for other expenses, such as a larger down payment.
The Break-Even Math
Here’s the key calculation:
Cost of points ÷ Monthly savings = Break-even point.
If you’ll own your home longer than that point, buying down your rate could save you money. If not, you may be better off holding onto your cash.
The Dream First Perspective
At Dream First Bank, we believe that buying a home isn’t about chasing headlines—it’s about finding the right solution for you. The Fed may grab the spotlight, but your final mortgage rate will also depend on the quality of your credit and the term of your loan.
Our mortgage team is here to help you crunch the numbers, weigh the options, and figure out what makes the most sense for your future.
Ready to Take the Next Step?
Whether you want to connect with one of our mortgage professionals and talk it through—or you’re ready to get started and begin your application online—Dream First Bank is here to help.
Connect with us today, and let’s take the next step toward your dream home.