Interest Rates – What You Should Know!

Higher Rates/ Additional Debt

If you are unfamiliar with investing, or with real estate, it is important for you to understand that the higher the interest rate, the more expensive it will be for you. Higher interest rates on your loan will mean that you will have more to pay back on what you borrow. Something that can help, as a general rule of thumb, is that an adjustable-rate mortgage (ARM) can make a home more affordable for you (making it easier for you to qualify for the loan). Consider all options available, however, because there are various financing strategies available to you.

“Only the Fed Knows” is a Misconception

A weatherman uses his knowledge and expertise to make predictions on what the weather will be like in the next week, or so. He does not, however, control the weather. Similarly, the Federal Reserve uses its authority and knowledge to predict what will be fair and favorable mortgage interest rates for the nation as a whole. They are, nevertheless, altogether unable to control political, economic, and social events. So, it becomes important for you to make your financial decisions based on factors including your budget, your needs, and your future plans… not just on the set interest rates of the Federal Reserve.

Lock In at Low Rates

A great strategy for getting the lowest rate possible is to keep updated on the current mortgage interest rates available every day. If you decide you want to lock in at a certain interest rate, you will need to have already completed a loan application and sent it to your lender for pre-approval. This must be done so that your commitment doesn’t run out before your loan is approved. Follow up and be sure that the lender has received all of the necessary documentation. You will also want to quickly get a property appraisal through your loan agent, which typically costs about $300. This will help you secure the interest rate that you wish to lock in.

Don’t Play the Waiting Game

Putting off your dream for a new home just so that you can lock in at a lower interest rate may create a nightmare for you. Although rising interest rates can create problems for home buyers, waiting and hoping for a lower rate isn’t necessarily a smart move. You may end up paying a higher price, or, worse, completely missing your chance to buy the home you want. Remember that you always have the option of refinancing at a later date, when interest rates come down.