Mortgage interest rates hit the highest level in 21 years this week
Mortgage News: What Should Home Buyers Do Now?
Mortgage interest rates hit the highest level in 21 years this week, with 30-year fixed loans rising above 7%. Some economists believe that consumers should be prepared to see even higher interest rates this year, if the Federal Reserve continues to raise the benchmark rate. The Fed will meet three more times from now through December.
If you are interested in buying a home, there are still some things you can do to get the best interest rate possible.
Pay Down Debt and Increase Your Credit Score
The Federal reserve raised rates 25 basis points in July. That translates into a .25% increase in the rate you pay on your credit cards. So, if the annual percentage rate (APR) on your credit card is currently 17.99%, then most likely, it will go up to 18.24% soon.
If possible, make more aggressive efforts to pay off or pay down credit card debt. This will cut down on the amount you pay in monthly interest fees, and help to improve your credit score. Remember, people with higher credit scores get better rates than those with poor credit scores.
Consider Buying Points Up Front
Mortgage points (or discount points) are fees you can pay up front to lower your interest rate, where one point will cost 1% of your loan amount. For example, if your loan amount is $350,000, then one point would be $3,500. This may increase your closing costs, but it can also save you thousands of dollars in interest fees over the life of the loan. In general, the longer you plan on staying in the home, the greater the benefit.
We can calculate the break-even point on how much you save in interest, compared to the cost of points paid up front. Plus, we can do an in-depth analysis on numerous loan programs to find out what type of loan best fits your needs. Please give me a call if you – or your friends and family – need professional advice on mortgage financing. We are here to help!
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.