Getting Comfortable with Mortgage Rates

Mortgages

Mortgage rates. Scary numbers that can haunt you not only when thinking of buying, but long after the purchase.

Rates go up and down not only with the federal prime but with the general economy of an area. Special lending programs created for rural areas can make buying in the country side more affordable, even if the commute is a bit longer.

You also affect the rates. Your specific circumstances, credit rating, income, debt ratio all make a difference. The better your rating and ratio of debt to income the better rate you will get since you are a better risk than someone who has not been as careful with their money.

What About Discount Points?

Discount Points, or simply Points, are a way to buy down your interest rate with cash up front, either from you, the seller, or a combination. Each point is you pay is a buy down from a higher rate. As an example, you pay one point on a rate of 11% to end up with a rate of 10%.

If you have the cash, or the seller is willing to pitch in for some of the points then you can get a better rate which means a lower payment and often make the difference in a purchase being closable.

Points are offered more often in difficult markets or high rate market situations. In cases where the rate is consider low for the market, like in the Jacksonville Beach real estate market, there is no real benefit to points and they are not part of the loan options.

How Do I Know If Points Will Help Me?

Talk with several local area lenders and banks. Get the information directly from the money sources. Normally lenders will be happy to talk to you about loan options and the benefits of Discount Points.

What If the Rates Drop Right After I Purchase?

Read your loan carefully. If there is no prepayment penalty on the loan then there is nothing stopping you from applying for a refinance at a lower rate immediately.

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