Mortgage rates continue to hover around 4% — an amazing bargain if one looks back on the long history of home loan rates. For those willing and able to take on a loan amortized over 15 instead of 30 years, the rate will be more like 3.5%. Yes, those rates are higher than a year ago. But, it’s a lot less than the 8.25% rate I paid for my first home loan or the 6.5% rate folks were paying in 2003. And let’s not even think about the 14% rates offered in the glorious 1980s (when I bought my second home).
The rate itself is only one factor to consider when shopping for a mortgage. If you focus only on that raw rate, you’re going to end up less well off than you could be. Make sure you understand how that rate is set. Is it lower than a quote that you got from another lender because the market ticked down between yesterday and today? Your rate will change daily until you “lock” the rate, which requires that you have a purchase contract in place.
Perhaps the rate your being quoted by one lender is lower because you will be charged points at closing, which buys down the rate. Or, perhaps the rate is lower because the fees are higher. Look closely at the whole package. Soon, we’ll have new financial disclosure rules that will make it easier to look at these comparisons, but still, it’s no first grader’s exercise.
Finally, consider the performance history of your lender. Your real estate agent should be able to help you with this. Some lenders are notorious for not closing on time. If that’s the case, steer clear of them in this competitive market because you could lose the house to a backup offer.
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