Why It Doesn't Pay to Wait for the Lowest Possible Mortgage Rate

Don't wait for the perfect rate and miss out on one that's good enough.

If you're shopping for a mortgage loan to purchase a home or refinance your existing loan, you don't want to pay more for your loan than you have to. That means shopping around with different mortgage lenders to see which offers the most affordable rates.

But one pitfall to avoid is trying to time your loan application for the lowest possible rates. Here's why.

Trying to get rock-bottom rates can backfire

If you hope to save as much as possible on your mortgage, it may seem smart to watch trends in national average rates and apply when rates are at their lowest.

And theoretically, that would be the best approach. But there's one big problem with that: You can't know when rates are at their lowest. Last year, mortgage rates hit new record lows over and over -- when many people thought they couldn't fall any further.

Since it's impossible for even the experts to know when rates have bottomed out, there's a huge risk in timing your home loan for the very lowest rates. You never know when rates are going to climb back up.

If you've held out on getting a mortgage or refinance loan while waiting for rates to fall, you could miss out if rates reverse course. This can happen quickly, and it could take months or years for them to go back down -- if they do.

This can mean that trying to save a fraction of a percentage point on your rate costs you a fortune. If rates go up before you get your loan, you could be stuck between accepting a mortgage at a higher rate or waiting years hoping that rates will fall.

To avoid this, decide when to get a mortgage based on whether current rates are affordable for you. And consider whether you're in a good financial position to buy a home, or, if you already own a home, whether the savings from refinancing will be enough to cover closing costs.

Remember, if you get a mortgage or refinance, then rates fall dramatically, you can always refinance. But you can't go back in time and get a loan at the rate you passed up while hoping for even lower ones. Don't miss out on a really good loan offer just because you're hoping for a perfect offer that might never come.