what's a good deal today?
should I refinance?
what's my credit score?
rent versus buy?
what do I need to qualify for a good rate?
what are the tricks of the mortgage trade?
Buy low, sell high! Best advice in the world, but like so many words of wisdom, it loses practicality. So you've just (seenheard) an advertised rate of 4.75%. Is that good, bad, possible?
Ignore it, don't time it, just do solid research to determine if today's market rate is one that you would consider using against your given alternatives.
There are so many fancy advertisements meant to confuse you and prevent you from shopping apples to apples. This is a desperate time for the average person to find sustainable business in real estate; flipping, brokering, or lending.
BANKRATE is the best tool for shopping rates to see where the market is at and where it is heading.
BANKRATE is the best tool for shopping rates to see where the market is at and where it is heading.
Today, Bankrate says that a 30yr fixed costs 5.43% and is trending down. There are local factors that will increase this or decrease this, here are some:
INCREASE:
-credit score below 680
-high risk demographic neighborhood with many foreclosures
-less than 30% equity in home (will cost a minimum of .5%)
-home loan greater than $400k (jumbo loan)
DECREASE:
-pay origination points
-adjustable rate mortgage (ARM)
Double check the estimated closing costs and application fees if dealing with an unknown mortgage broker. Ideally, choose a mortgage from your credit union. Otherwise, get an estimate from two lenders that your bank recommends and take the best offer.
TO LOCK or NOT TO LOCK.
Absolutely lock with one exception. The terms were agreeable to you today to proceed in this direction, therefore accept them in entirety. The rates will NEVER drastically fall, but can ALWAYS drastically rise overnight and unexpectedly. The exception is when you're a betting individual and your broker assures you that every economist is predicting a rate cut of the Discount rate. Even then this can only mean .1 - .25 % rate reduction to you at a consumer level which is neglible.
Don't fret, mortgages aren't permanant. The average US household moves every three years. Typically, one wouldn't get a mortgage for less than two years due to the overhead costs. Likewise, we can't plan to hold one for ten years. If you can imagine your situation remaining constant for 3-5 years, then a 30yr fixed will do well for you. Anything else is a gimmick or a gamble (some win and some lose in the game of chance)!
Don't fret, mortgages aren't permanant. The average US household moves every three years. Typically, one wouldn't get a mortgage for less than two years due to the overhead costs. Likewise, we can't plan to hold one for ten years. If you can imagine your situation remaining constant for 3-5 years, then a 30yr fixed will do well for you. Anything else is a gimmick or a gamble (some win and some lose in the game of chance)!
$50 per 1/4% equates to a difference of $600/yr. If you pay 1 discount point on a $250k loan ($2500) to save on interest, you would need to have the loan for (2500/600=) 4.1 years to break even (and even longer when you consider the Time Value of Money (interest that could have been earned on the $2500 pre-payment). If your credit allows, you want a loan with 0 discount points and 0 origination points.
Hope this helps and feel free to address common concerns that I have overlooked here.
No comments:
Post a Comment