Thrifty Thinking: Mortgage Rates

Prospective home buyers may want to consider intensifying their search. The Washington Post reported earlier this month that mortgage rates are climbing with no evidence of slowing down. According to data released by the mortgage loan company, Freddie Mac, the 30-year fixed-rate average climbed to 4.6 percent, which is its highest level this summer. To put things in perspective, the average rate last year for 30-year mortgages was 3.93 percent. In addition to that, the 15-year fixed-rate average rate rose to 4.08 percent. It was 3.18 percent a year ago.

Also, the Federal Reserve is putting out signs that it may be raising interest rates. It has already raised interest rates twice this year. Although Federal Reserve interest rates are not directly tied to mortgage rates, they do affect them. And the yield on long-term bonds growing to over three percent indicates that mortgage rates will likely continue to rise.

According to Tioga Franklin, a FDIC-insured bank headquartered in Philadelphia, this may not be the best news for those looking to buy a home. “While rising mortgage rates indicate that the economy is doing well, it also means prospective home buyers will be paying more with their mortgage rates. Even a few percentage points could mean paying significantly more over the lifetime of a loan.” You may not be able to control interest rates, but there are a few things you can do to minimize your overall cost:

• Be proactive in searching for the best mortgage rate. Get quotes from multiple lenders and read reviews about each and every lender you speak with. Use a mortgage rate calculator to see where you might stand regarding rates and monthly payments. Many bank websites offer them at no charge.

• Ask for a pre-approval when you begin your home search. Some lenders, like Tioga Franklin Savings Bank, offer this service at no charge. A pre-approval can help in negotiating the price of your new home.

• A low credit score will likely mean you’ll have to pay a higher rate if you are approved at all. Check your credit score and make any necessary improvement to ensure you’re paying the lowest rate possible. Keep in mind, credit bureaus can take up to 90 days or more to reflect changes in your credit scores. Be proactive. You are entitled to a free credit report each year. Bureaus like Experian and Trans Union offer these services on their websites.

• You can negotiate. After you have chosen a mortgage type and received an estimate in writing, ask if there is anything you can do to get more favorable terms. It’s not always successful, but it’s worth a try.

• Most important, shop around so you can see what else is out there. Spend time picking a Lender like you did picking your home. It will pay off.