Predicting interest rates in today’s economy is at least as hard as winning in Las Vegas. But even if rates are on the rise, there are a number of options you can exercise to get the lowest rate possible on your home loan. Consider the following strategies.
1. Consider An Adjustable Rate Mortgage (ARM)
Even though the rate on your loan may fluctuate, an ARM will allow you to enjoy a lower monthly payment at the outset. Traditional ARMs adjust every year, but ARMs now exist to suit just about everyone with 3- and 5-year adjustment periods, even a single adjustment at the 7-year mark.
2. Float Down
Financial products introduced recently will lower your rate if market rates fall, but won’t raise it if rates creep up again.
3. Quick Close
If you can settle on your loan quickly (say, 30 days or less), some lenders will agree to shave percentage points off your rate.
4. Lock In
If you fear rates are going to rise, lock in early before they do. Some lenders allow a float-down option, but with an up-front fee.
5. Pay Points
If you’re willing to pay some interest up front (known as points), you can get a fixed-rate mortgage with a lower interest rate.
6. Stay Awhile
If you agree to keep the same loan for five years or longer, some lenders will cut their interest rate. If you do move or refinance before the agreed-upon deadline, you may have to pay a penalty of about 1% of your loan.
7. Use Good Credit To Negotiate
Do you have A-1 credit? If so, you’re a hot commodity for lenders. They may even be willing to reduce closing costs to get your business. If interest rates are firm, ask for a reduction in fees for document preparation, processing, courier services, copying, underwriting, appraisal or application. Other reductions might include: fewer or no points, lender’s attorney’s fee, commission rate (for mortgage brokers) and the credit check fee. On an adjustable rate mortgage, ask for a lower starting rate.
With so many options available, you may need a professional to help you choose the best program for your situation. Call us today to see what’s available in your area.
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