DES MOINES, IOWA — The last time mortgage interest rates were as low as they are now you could buy a gallon of gas for 19 cents or a loaf of bread for 16 cents.
Borrowers can finance their home purchase for an average 4.2 percent on a 30-year fixed-rate home loan, says government-controlled mortgage buyer Freddie Mac, in its weekly survey of mortgage rates posted Thursday.
“People are starting to think, ‘I don’t want to miss something that may be a once in a lifetime opportunity,’” said Cass Chappell, a financial planner at Chappell, Mayfield & Associates in Atlanta.
Here are some tips to consider as you look at mortgage options:
Shop around – Compare the terms offered by different lenders. One good Web site to check is Bankrate.com. You’ll find the latest mortgage rates for your area, along with several calculators that may help you decide. If you are refinancing, talk with your current lender and make it clear you’re shopping around. In order to keep your business, your bank may cut or eliminate some refinancing costs. Avoid flashy ads or unfamiliar lenders that may draw you in with introductory interest rates and may have hidden fees. Ask friends and family members for recommendations.
Lock in a rate- To make sure you get the current interest rate, ask about a mortgage rate lock-in and get it in writing. This is a guarantee by the bank that you’ll get the current low rate while your loan is being processed. Locked in rates typically are for specified periods of 30 or 60 days. Before you sign any commitment, make sure you understand all the costs and details of the loan and you’ve done your comparisons and know it’s the best deal.
Do your homework – Before meeting with a banker make sure you can document your income. It’s also a good idea to get a copy of your credit reports in advance to avoid any surprises. If you are refinancing, be sure your house is worth more than you need to borrow.
Consider shorter terms – One strategy to consider is comparing the payments of a 30-year mortgage with those of a 15-year. Taking the shorter-term loan will cost more per month but will build equity faster and cost you thousands of dollars less in interest.
