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While 2020 has been a good year to buy a home from a mortgage interest rate perspective, from a housing inventory standpoint, it's been terrible. A limited supply of available homes has driven prices upward, forcing buyers into bidding wars and causing many to stretch their budgets to an uncomfortable degree.
In fact, many prospective buyers are being told to sit tight and wait until the market opens up with added inventory. Of course, the concern is they could miss out on today's low rates. But a new report from CoreLogic, a leading provider of consumer, financial, and property data and analytics, reveals that would-be buyers who don't complete a home purchase this year may have nothing to worry about. According to that report, there's a good chance mortgage rates will stay extremely competitive for the next three years.
What's in store for mortgage rates?
CoreLogic predicts that the record low mortgage rates we've seen over the past few months will hold steady into 2021. In fact, we may even see rates below 3% for the 30-year mortgage for the entire year. Beyond that, it's a bit harder to predict, but on average, CoreLogic thinks mortgage rates will hover around 3.2% for the next three years. That's close to a full percentage point lower than the average rate between 2010 and 2019.
How to snag a great mortgage rate
Of course, just because lenders are offering competitive mortgage rates doesn't automatically mean you'll qualify for one. But there are steps you can take to increase your chances of getting the best rates available.
1. Boost your credit score
To snag a top rate, you'll need a credit score in the mid-700s or higher, generally speaking. If your score needs work, start by paying all your incoming bills on time. Also, maintain long-standing credit accounts, because they'll help boost your score, too. And be sure to check your credit reports for errors. If there's a mistake on your credit report, it could drag your score down. As such, fixing errors could result in a major improvement.
2. Lower your existing debt
Mortgage lenders don't want to see that you're already up to your ears in debt. It's a red flag that you don't manage your money well. Also, the more debt you have, the more difficulty you may have keeping up with your monthly payments once you sign a mortgage. Therefore, paying off a chunk of debt is a smart idea.
3. Boost your cash reserves
The more money you have in the bank, the easier it will be to get a loan from a mortgage lender. That's because your lender will take comfort in knowing that you have personal assets to fall back on -- even if you lose your job. Also, you'll need a pretty hefty sum to make your down payment, so it never hurts to grow your savings.
Will mortgage rates really stay super-low until 2023? Without a crystal ball, we just don't know. But given the state of the U.S. economy and its (likely) prolonged recovery, there's a good chance CoreLogic's forecast is on the money. This means that you have a prime opportunity to lock in an affordable mortgage -- even if you're not ready to apply for one right away.