Mortgage Rates Hit Their 12th Record Low

Just when you thought rates couldn't get lower, here we are.

Mortgage rates have been extremely competitive since summertime, and they just keep getting lower. The average mortgage rate for a 30-year fixed loan fell this week to 2.78%, according to Freddie Mac. That's the lowest rate on record in nearly the past 50 years and the 12th record set for rates this year.

Should you lock in a mortgage today?

Today's mortgage rates are incredible -- there's no question about it. With a rate of 2.78% on a 30-year fixed-rate loan, you're looking at a mere $410 for principal and interest monthly for every $100,000 you borrow. Your total monthly costs will be higher, however, once you factor in added expenses like property taxes, homeowners insurance, and private mortgage insurance (PMI), which applies if you don't make a 20% down payment on the home you buy.

But despite the lure of low rates, now may not be the best time to get a mortgage. For one thing, housing inventory has been extremely tight this year, with many sellers holding off on listing their homes due to the coronavirus pandemic. The result? Home values have skyrocketed, so if you opt to purchase a home today, you could end up paying substantially more. And that, in turn, could wipe out the savings you'd be looking to reap by locking in a historically low mortgage rate.

Another thing to consider is that you may not qualify to borrow for a home at 2.78%, or anywhere close to that, if your credit score isn't in good shape. A lot of people have lost income during the pandemic, and have racked up debt because of it. If your credit score isn't in the mid-700s or higher, you generally won't be eligible for the best mortgage rates. And if your score isn't at least a 620, you likely won't qualify for a mortgage at all.

Let's also consider that the U.S. economy is still in a recession, and there's a lot of job insecurity at play. If you don't have a large amount of savings -- enough for a 20% down payment plus a good three to six months' worth of bills -- then you really shouldn't be buying, especially if you're at all worried about losing your job in the near term.

That said, if you do feel confident applying for a mortgage -- your credit is great; you have little debt; your savings are strong; and your job is solid -- then be sure to shop around with lenders before accepting an offer. While the average 30-year mortgage rate may be at a low of 2.78%, that's not necessarily the rate you'll be offered. See what offers lenders have available before moving forward with a loan, and don't forget to look at closing costs, too. It may be that one lender offers a better rate but a higher set of fees to finalize your loan, so you'll need to consider the big picture before making your final decision.