These dark times continue to have a bright side, of sorts, for homeowners and homebuyers. Mortgage rates remain at depths that would have seemed unthinkable just a year ago.
In early January, rates on 30-year fixed-rate mortgages sank to an average 2.65%, the lowest in the nearly 50 years of weekly surveying by mortgage giant Freddie Mac. Rates are now just slightly higher, averaging 2.73%.
But if you own your home and want to refinance, or if you're a buyer ready to make a bid on a house, you can't assume a mortgage lender will offer you one of today's spectacularly low rates way below.
In some cities, rates from different lenders can vary by close to one full percentage point, LendingTree found in a study last spring. Lender X might have a 30-year loan at 3.7%, but Lender Y's rate may be just 2.75%.
How can you be sure to land one of those ultra-low rates everybody's talking about? Industry experts say these four tricks are key.
1. It does pay to shop around
Don't stop your mortgage search at Lender X — because there might very well be a Lender Y out there with a much more attractive rate.
Homebuyers who say yes to the very first mortgage offer end up paying an average of around $37,500 more in total interest over the course of a 30-year loan than buyers who gather rates from multiple lenders, LendingTree found.
In cities including San Francisco and Boston, the lifetime interest savings when you shop around can exceed $50,000.
"It pays to do your research," says Tendayi Kapfidze, LendingTree's chief economist.
Compare not only interest rates but also APRs, or annual percentage rates, which factor in origination fees and other expenses to give you a more comprehensive look at the yearly cost of the loan.
2. You'll need a healthy credit score
"To get a low rate, the borrower will need to have excellent credit," says Richard Pisnoy, a principal with Silver Fin Capital, a mortgage broker in Great Neck, New York.
This is even truer now than it used to be. Banks have been tightening their lending standards, because they don't want to be left with defaults resulting from the current economic crisis.
For example, JPMorgan Chase last year started requiring new mortgage applicants to have a minimum credit score of 700 — in the middle of the "good" range — and make at least a 20% down payment.
Consumers may not like the new rules, "but they speak to the uncertainty of the times and the difficulty for these organizations to gauge borrowers’ ability to repay at a time when millions of people are suddenly out of work," says Matthew Speakman, an economist with Zillow.
The best mortgage rates have traditionally gone to borrowers with credit scores that are "exceptional" (800 to 850) or "very good (740 to 799). If you're not sure what your credit score is, it's easy to peek at it for free.
3. It helps if you're refinancing
People in the industry say it can be more challenging to get a low rate on a so-called purchase loan — to buy a home — than if you're a homeowner who's refinancing.
"In general, we see that it's typically easier to refinance than it is to purchase, given that the borrower has already been underwritten," says Grant Moon, CEO of the real estate fintech firm Home Captain.
"The lender has payments and historical propensity-to-pay information that makes it an easier proposition," Moon says.
Americans have been refinancing at a blistering pace, to slash their monthly mortgage payments and their lifetime interest costs. But some 19.4 million eligible homeowners are still missing out, says the mortgage data firm Black Knight.
Those mortgage holders could lower their rates by at least three-quarters of a point (0.75) — say from 3.75% down to 3% or lower — and save an average $308 a month, Black Knight says.
4. Be ready to move quickly
Mortgage rates are unpredictable, and the amazingly low ones can be available for just a hot minute.
"Even though rates are low, they still move every day," warns Pisnoy. So if you come across a rate that would give you an impressively low monthly payment, work with the lender to try to lock it before it's gone.
When you lose out on a dreamy rate, experts say it's a mistake to sit around and wait for mortgage rates to go down again. They can go higher just as easily as they can go lower. And, refinance loan rates have been going up as lenders factor in a new 0.5% fee on refi mortgages.
So, the advice is similar to what dithering investors are told when they're tempted to wait based on what stocks might or might not do: Don't "time the market."
If you're a homebuyer and find the perfect house, comparison shop for your mortgage and try to settle on one quickly. Don't miss out on a great loan or a great home.
Take the same approach when you buy your homeowners insurance. Go online and compare home insurance quotes, to fine the right coverage for the best price.
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February 01, 2021 at 01:30AM
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4 tricks to landing one of today's record-low mortgage rates - Yahoo Finance
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