Landing a mortgage rate under 3% just got easier

Mortgage rates are on an unbelievable downhill ride, and they still haven't found the bottom.

Rates this week have reached new record lows that would have been hard to imagine a short time ago. That's according to surveys that suggest if you're shopping around for a loan, have a solid credit score and aren't offered a rate below 3%, you may not be looking hard enough.

The current explosion of coronavirus cases in the U.S. has shaken the financial markets and pushed interest rates to places they've never been before. One expert calls today's sunken mortgage rates "generally amazing" and says that'll be true for a while — even if they start rising again.

Mortgage rates go incredibly low

Mortgage rates that have been tumbling for months have now taken a dive all the way down to an average 3.03% for a 30-year fixed-rate home loan, mortgage giant Freddie Mac reports.

That's the lowest since the company began tracking mortgage rates nearly a half-century ago, and it's the sixth record low seen since the beginning of March. And because 3.03% is the average, you can presume that plenty of loans are out there at rates below 3%.

Freddie Mac's survey rates come with an average 0.8 point. A year ago, 30-year fixed mortgage rates were averaging 3.75%.

But wait a minute — you think rates averaging 3.03% sound sweet? Mortgage News Daily reported on Friday that its survey of lenders has found that 30-year rates have plummeted to an even more astonishing all-time low of 2.88%, on average.

And some borrowers are getting loans at a breathtaking 2.5%.

Mortgage rates were never expected to fall so far, says John Pataky, executive vice president at TIAA Bank.

"Before COVID-19, all indications showed that given the strong economic growth, high employment, and bustling investment markets, rising rates were a more likely event," Pataky says. "COVID-19, and the corresponding Fed actions, have been game changers for the housing market."

To help bring the economy out of its coronavirus recession, the Federal Reserve has helped sink mortgage rates by slashing its benchmark interest rate to next to nothing and has been buying up mortgage-backed securities. Those are home loans bundled into investments similar to bonds.

How do you get an insanely low rate?

Experts say it's tough to predict where mortgage rates go from here. But whether they move up or down, Matthew Graham, chief operating officer with Mortgage News Daily, expects borrowers will continue to find bargains.

"Even if rates do manage to move higher, something would need to change very quickly and in a very big way for such a move to threaten the generally amazing rate environment," Graham says.

But can anyone get a mortgage rate under 3%? Not necessarily, because while the pandemic has caused mortgage rates to tank, it also has led lenders to tighten their standards. They're wary of defaults during a time of high unemployment.

"Credit scores can really matter – for example, the headline rate you see advertised might require a higher score," says TIAA's Pataky.

To impress a lender, you typically need a credit score in the "exceptional" range (800 to 850) or one that's at least "very good" (740 to 799).

If you can qualify for a dirt-cheap mortgage rate, the savings can be substantial, whether you're buying a home or are refinancing. At least 16.2 million homeowners who are sitting on mortgages approaching 4% or higher could save an average $283 a month by refinancing, data firm Black Knight says.

Experts say you'll get the best possible rate by shopping around: Gather loan offers from several lenders and compare them side by side. Don't ever grab the first loan you're offered, because different lenders might offer you widely different rates.

Other mortgage rates this week

Rates on other popular types of home loans are mixed, Freddie Mac says.

The average for a 15-year fixed-rate mortgage has dropped to 2.51%, from 2.56% last week. Fifteen-year mortgages are often used as refinance loans and are much cheaper than they were a year ago, when the average was 3.22%.

But rates on 5/1 adjustable-rate mortgages are a little higher this week. Those loans — commonly known as "ARMs" — have rates that are fixed for five years and then can adjust up or down each year, in sync with a benchmark interest rate like the prime rate.

ARMs are currently being offered at initial rates averaging 3.02%, up from an even 3% last week. Last year at this time, the typical starter rate on those mortgages was 3.46%.

Once you've got your mortgage rate where you want it, give your homeowners insurance some scrutiny. Go online, get several home insurance quotes, and make sure you've got the right coverage at the right price.