Anyone who as ever purchased a home knows the feeling… You have a purchase agreement signed. You are about to close in maybe 30 days on your new home. Now you are in touch with your loan officer and get the question: Do you want to lock your rate in or float it?
Suddenly you start looking at 10 year treasuries and wonder what the market will do in the next 30 days. Your loan officer might offer some good or bad advice as well. So what to do?
There is really no way to predict where short-term interest rates will go. To time mortgage rates when you are purchasing your home is just not a good idea. Look at today’s rate and see if you like it… if you do then lock it in. The only time when you can time interest rates is when you are refinancing, not when you are purchasing.
The only exception to the rule is to wait until the afternoon or next day if there is already a repricing in effect by movement in the bond markets.
Many lenders and brokers do offer what is called “free float-downs” after you lock. If rates improve with a quarter of a point or half a point they can let you in on the lower rate. The lenders do build this into the pricing though so you will indirectly pay for the privilege. Ask your loan officer for details.
Good luck!
-Ola Edvardsson
P.S. Don’t forget to visit our mortgage center for free mortgage quotes.
Shopping for a three bedroom, raised ranch home in a neighborhood you can afford, the house you intend to purchase is listed for $269,000. This could be considered a bargain in the northeast part of the country.
While the listed price of this home is under $270,000, the actual cost of buying that home under existing money-lending rates will vary from lender to lender. What you pay to purchase this same home for the same price will depend upon the kind of mortgage instrument you choose to finance your loan and the kind of fees you are asked to pay, not the offer you make to purchase it.
When you are talking about the cost of buying real estate, the only thing a few factors really matter after the ink dries on all the paperwork. What are the fees attached to accepting the loan required to buy this particular home and whether the buyer can meet the monthly mortgage payments. While the purchase price won’t change, what it will cost you real money to move into that house. Those costs will vary from lender to lender and loan to loan.
Know how to shop for the right loan to fit your circumstances. but make sure you shop for it.
Have every potential lender write down all the costs associated with the various loans they are offering, then try to negotiate for the best deal. The terms they offer are always negotiable, no matter what the loan officer who presents the deal tells you. Different deals can be obtained for buyers with the same qualifications because there are costs called “overages” built into the prices quoted to buyers for almost every kind of loan. These overages are where the purchaser has the “wiggle room” to negotiate a better deal and save money.
A mortgage is a product, not a gift.
Always consider these things:
RATES
* Try to obtain the lowest rate possible.
* Ask whether the rate you are being offered is fixed or adjustable. Rates for adjustable loans generally start out low but the interest rate and your monthly payments will go up too as general interest rates climb.
* Ask each lender or broker for a list of its current mortgage interest rates and whether these rates are the lowest for the day or week.
* Ask about the annual percentage rate or the APR. The APR is a barometer that takes into account a fee called points, broker fees, and other credit charges you may have to pay as part of a yearly rate. Find out in dollars amounts what the points add up to.
POINTS
Points are fees or the actual cost of certain loans. They are add-ons to what at first might look like a low interest rate and are usually tied to the interest rate. The more points you pay, the lower the interest rate. Points are fees paid by borrowers in return for a lowered interest rate.
To learn whether you are being asked to pay a fair market rate in points and fees or not in your area, check local newspapers for current points and interest rates. The internet and local newspapers offer current rates in charts that you should obtain to determine what the prevailing rates are in your market. The rates will vary from market to market. Once you’ve determined this, ask for the points being charged to be quoted to you in dollar amounts, otherwise you won’t be able to calculate what the points actually cost.
MISC. FEES
There are many fees attached to every home loan. It is how banks, mortgage brokers, lawyers, paralegals and savings institutions earn a living. These fees include things like a loan origination or underwriting fee, broker fees, and transaction fees, taxes, settlement, and closing costs. Some of these fees are negotiable, others like taxes, common fees, can not be negotiated. Certain fees are paid at certain times during the loan application process. Some are paid when you apply, like the application fee and appraisal fees. Some lenders waive these fees, but are charging you other fees to compensate. Other fees are paid at closing when the final mortgage papers are signed. With some lenders, you may borrow money to pay these fees, others require you pay with seasoned money or funds that have not been borrowed. If you have to borrow fee money, the cost of borrowing this money ultimately raises your loan amount and the total costs of borrowing this money.
Always remember these three things when you are looking for a mortgage, shop, compare, negotiate.
