Mortgage rates keep climbing, but here’s how to pay less
Mortgage rates continue to climb, with 30-year fixed mortgages now at 6.53%, according to Bankrate data from September 21. The national average for 15-year fixed rate mortgages – although it has been rising since August – has fallen slightly. of the day before at 5.75%. (See the lowest mortgage rates you can get now here).
How to get a lower mortgage rate
There are a number of things you can do now to get a lower mortgage rate. First, if you can afford it, shortening your loan can be beneficial. Indeed, 15-year mortgage rates continue to be lower than 30-year mortgage rates.
It may also be worth considering an adjustable rate mortgage (ARM), if that suits your long-term plans. The latest Bankrate data shows that average rates on 5/1 ARMS (rates are fixed for five years and then adjusted) are 4.84%, considerably lower at the start than 15 and 30 year fixed rate mortgages. That said, ARMs often make the most sense for short-term homeowners who only plan to stay in the same home for 5-7 years. As ARM rates become variable, “ARMs can be risky, and in the long run, they may end up costing more than a fixed mortgage with a higher starting rate,” analyst Jacob Channel said recently. LendingTree’s main economics, at MarketWatch Picks.
Experts advise shopping around, getting quotes from 3-5 lenders, determining your credit score (improve it if necessary) and debt-to-equity ratio (DTI), to help you determine the rate you’ll pay , regardless of whether you get a 15-year fixed, a 30-year fixed or an ARM. To calculate your DTI, divide your monthly debt payments (mortgage, credit card payments, car, student or personal loans, child support) by your gross monthly income. If the number you come out with is 36% or less, your chances of qualifying for a mortgage, and at a better rate, are better than if you come out with a higher number like DTI.
Another way to lower your mortgage rate is to use discount points, which are fees paid to lower an interest rate. Typically, one point lowers the interest rate by 0.25%, although this may vary. “When you pay cash back points, you’re giving the lender a portion of the interest payments up front in exchange for paying less interest each month,” Nerdwallet home and mortgage expert Holden Lewis recently said. , at MarketWatch Picks. But note that there may be limits to the number of discount points you can buy, and buying points may not make sense, especially if you don’t plan on staying in the house for long.
This MarketWatch Picks guide has additional tips to help you save on your mortgage, including using first-time buyer programs, getting quotes from 3-5 different lenders, and more.
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