With the Fed set to raise interest rates, there’s a real threat that mortgage rates will increase as well. That’s some uncomfortable news for many people who are currently dreaming of buying a house. A recent study by Berkshire Hathaway HomeServices found that 76 percent of homeowners and 79 percent of hopeful buyers said that interest rates posed a challenge. If you’re among those looking for a new home, or even someone who already owns but is looking to refinance, the time to lock in a good rate is now. Below are some tips for getting the best, lowest rate.
While many people looking for a mortgage still do it the old fashioned way — going to a local bank or credit union — don’t brush off online lenders like Quicken Loans. As Money reports, not only have online lenders streamlined the paper-heavy process of applying for a mortgage, they can now provide ammo in negotiations. Your credit union may still be able to beat the rate, but the more competition in the mortgage market, the better your chances at getting a low rate.
Consider the ARM
Adjustable-rate mortgages (ARM) — a low, fixed rate for a few years before slowly resetting — are worth considering. This is especially true if you’ve thought about (and carefully planned for) what the future holds for you and your family. Taking on an ARM could boost short-term savings, allowing you to buy a bigger home five to seven years down the line.
Compare FHA Vs. Traditional Loans
Many home buyers with low credit scores opt for a Federal Housing Authority (FHA) loan, which allows people with scores of at least 580 to lock in an interest rate of just 3.5 percent. That sounds great, right? Well, the issue here is that because you’re viewed as a “high risk borrower,” you’ll also be paying a 0.85 percent insurance premium on top of your interest every month. And that premium often stays put through the entire life of the loan. A better option may be is going with a low-down-payment on a conventional loan. The insurance premiums on that type of loan are usually canceled when you get to 20 percent equity.