Mortgage rates have risen to over 7%. Here are 5 ways to get a far lower rate
Rate hikes continue: 30-year fixed-rate mortgages continue to rise with rates currently at 7.12%, up from 6.89% the week before, according to Bankrate data Oct. 12. The national average for 15-year fixed-rate mortgage loans has also increased from 6.09% to 6.33%. (You can find the lowest mortgage rates you can get right here here).
This will give you a lower mortgage rate
There are a number of ways to achieve a rate well below 7%. First, reducing your loan can help you save money because mortgage rates on 15-year mortgages continue to be lower than 30-year mortgages.
It may also be worth considering an adjustable rate mortgage (ARM) if it makes sense for your long-term plans. The latest Bankrate data shows that the average interest rate for 5/1 ARMS (interest rates are fixed for five years and then adjusted) is 5.36%, which is significantly lower to start with than the 15-year and 30-year fixed-rate mortgages . ARMs often make the most sense for short-term homeowners who only plan to stay in the same home for 5 to 7 years. As ARM rates become variable, “ARMs can be risky and cost more over the long run than a fixed-rate mortgage with a higher upfront rate,” LendingTree senior economic analyst Jacob Channel recently told MarketWatch Picks.
Check out the lowest mortgage rates you can get right now.
It also often pays to shop around and get quotes from 3-5 lenders. And you need to get your finances in order. Find out your credit score – and improve it if necessary (a score of 760 or higher often helps you get the best interest rates). You should also determine your debt-to-income (DTI) ratio; To calculate this, divide your monthly debt payments (mortgage payments, credit card payments, car, student or personal loans, child support) by your monthly gross income. If the number you get is at or below 36%, your chances of qualifying for a mortgage, and at a better interest rate, are better than if you put a higher number as the DTI.
You can also lower your mortgage rate by buying discount points, which are fees paid to lower an interest rate. Typically, one point lowers the interest rate by 0.25%, although this can vary. “When you pay rebate points, you give the lender a portion of the interest payments up front in exchange for paying less interest each month,” Holden Lewis, home and mortgage expert at Nerdwallet, recently told MarketWatch Picks. It’s important to note that the number of rebate points you can buy may be limited and buying points may not make sense, especially if you don’t plan on staying in the house long.
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