Every time the Federal Reserve meets, my phone rings. Someone read a headline and wants to know whether to lock. Almost every time, I have to start by explaining that the thing they read about is not the thing that determines their payment.
The Fed does not set your mortgage rate
The Federal Reserve sets the federal funds rate. That is the overnight rate at which banks lend to each other. It directly influences short-term consumer credit: credit cards, home equity lines, auto loans.
Your 30-year fixed mortgage is not a short-term instrument. It prices off the 10-year Treasury yield and, more precisely, off the market for mortgage-backed securities. Investors buying those securities decide what yield they need, and that is what filters down into the rate sheet your lender hands you.
This is why mortgage rates sometimes fall on the day the Fed raises, or rise on the day the Fed cuts. Markets price expectations in advance. By the time the announcement happens, the move is usually already in the number. What actually moves mortgage rates is surprise: inflation data that comes in hotter or cooler than expected, jobs reports, and shifts in what investors think inflation will look like years from now.
What this means for youDo not try to time a lock around a Fed meeting. By the time you read the headline, the market has already moved. Lock when the payment works for your budget, not when you think you have outguessed the bond market.
Where rates sit today
These are national benchmarks, updated automatically rather than typed into this page and left to rot:
Loading current rate benchmarks.
What sets your rate, specifically
The number in a headline is an average. Yours is built from your file. In rough order of impact:
1. Credit score
Conventional pricing moves in tiers. The best pricing generally sits at 740 and above, and it steps down from there. The gap between a 680 and a 760 borrower on the same house, same day, same lender, is real money over 30 years. If you are 20 points below a tier break, it is often worth 60 days of work to get there before you apply.
2. Loan-to-value
How much you put down. More equity means less lender risk, which means better pricing. Crossing 20 percent down also eliminates private mortgage insurance on a conventional loan, which is a separate cost from your rate but hits the same monthly payment.
3. Debt-to-income
Your total monthly obligations against gross monthly income. This is more often what determines whether you qualify at all, rather than what rate you get. Paying off a car loan before applying can matter more than the rate you were shopping for.
4. Loan type and property use
Conventional, FHA, VA, and jumbo all price differently. A primary residence prices better than a second home, which prices better than an investment property. If you are buying a rental here, expect to pay more in rate than the headline number, and budget for a larger down payment.
5. Lock period
A 45-day lock costs more than a 15-day lock, because the lender is carrying the risk longer. Do not buy more lock than your escrow timeline needs.
Rate versus APR
The interest rate determines your principal and interest payment. The APR folds the lender's fees and any points into one annualized number.
When you compare two loan offers, compare APR. A quoted rate that looks unusually good next to an APR that is far above it is telling you the fees are heavy. That gap is the actual cost of the loan showing through.
Points and buydowns: the only math that matters
A discount point costs 1 percent of the loan amount and buys your rate down. Whether that is smart is one calculation:
Break-evenCost of the points, divided by the monthly payment savings, equals the number of months to break even. Keep the loan longer than that and you win. Sell or refinance sooner and you lost money.
On a $400,000 loan, one point costs $4,000. If it saves you $85 a month, your break-even is roughly 47 months, so just under four years. The question is not whether $85 sounds good. The question is whether you will still have that exact loan in four years.
Most people will not. The typical buyer moves or refinances sooner than they predict when they are signing. Be honest with yourself about that before you hand over four thousand dollars.
The seller-paid buydown
In a market where sellers are competing, a seller-paid rate buydown is often worth more to a buyer than an equivalent price cut, because it reduces the payment immediately rather than shaving a little off the loan balance. A 2-1 temporary buydown lowers your rate for the first two years while you settle in.
This is one of the most underused negotiating tools in this valley, and it is a conversation to have with your agent before you write the offer, not after.
Adjustable rate mortgages
An ARM is fixed for an initial period, then adjusts on a schedule against an index, within caps. It is not automatically dangerous, and it is not automatically clever.
An ARM makes sense when you have a genuine reason to believe you will be out of the loan before the adjustment, and you can still afford the payment if you are wrong. If the plan depends on refinancing later at a rate nobody can promise you, that is not a plan, that is a hope.
The part people skip
Waiting for a better rate has a cost that never shows up in the comparison. While you wait, you are paying someone else's mortgage in rent, and prices may not wait with you. Meanwhile, a rate is the one term of the deal you can change later. You cannot renegotiate the purchase price after closing, but you can refinance a rate.
Buy the house when the payment fits your life and the house fits your family. Manage the rate as a separate, ongoing decision.