Mortgage Interest Rates – A Reality Check for Home Buyers Today
As if buying a home could not be any more challenging, it looks like interest rates are starting to go up, up, up! Is there any way to lock in an interest rate right now?
Low inventory, unreal listing prices, multiple offers, and now – higher interest rates. It was bound to happen. Interest rates have been at an all time low for a very long time and like any market trend, it has to go up at some point. Looks like mortgage lenders are anticipating these rates to go up a few times over the next few months. This realtor.com article offers some advice for buyers during this new rising interest rate trend.
Mortgage “Rate Lock” – Andrea Rutherford, local lender with Origin Bank, shares, “A rate cannot be locked until we have a contract, but if a borrower is purchasing new construction that might be complete within 6 months, a rate can be locked up to 245 days and can float down within 30 days if the rate is lower at that time. If it is higher, a borrower is locked at the rate locked previously.”
Using Mortgage Points – A Buyer can “buy down” their interest rate by paying points. Mortgage points, also known as discount points, are fees a homebuyer pays directly to the lender, usually a bank, in exchange for a reduced interest rate. Essentially, you pay some interest up front in exchange for a lower interest rate over the life of your loan. Each point you buy costs 1% of your total loan amount. Andrea Rutherford shares, “Buying down your interest rate really depends on how long the borrower will be in the house and how long it will take to recoup the cost of the discount points by the savings of the payment. If the numbers are positive, it’s not a bad option.”
Compare Multiple Lenders – We at Neighborhood Realty stress using a LOCAL lender. There are many wonderful lenders in our area and we love sharing about them! Our market is very different than most in our state, and our LOCAL lenders really know our market and can give you the best customer service. Ask for some recommendations!
Adjustable Rate Mortgage – With historically low interest rates, most buyers have wanted to lock in for 30 years. But with interest rates on the rise, some may consider an adjustable rate mortgage or ARM. An ARM mortgage is a home loan with an interest rate set for a fixed amount of time that adjusts to the market rate after the time period fixed has ended. An ARM may be a smart choice if you are not staying in the home for a long period of time.