Despite a rapid increase in home prices, mortgage rates have dropped to their lowest point in three years. As of Tuesday, the average rate for a 30-year conforming mortgage nationally was 3.6 percent, down 2 points from last week. This drop means a 6 percent increase in buying power.

There are disadvantages to lower mortgage rates however. Credit availability declines marginally as the rates decline. With a small margin, lenders become more risk averse so indicators of credit tightness like the average FICO scores have gone up as rates have gone down.

Buyers should be monitoring rates closely and expect fluctuations. It’s crucial for potential buyers or refinancers to stay on top of rates, work closely with mortgage brokers or lenders and learn about their options. Due to the volatility of rates this year, borrowers will most likely see both lower and higher rates between applying and closing.

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