Ideas to Help You Cash In on Record Low Mortgage Rates

A piece of news announced Thursday should add a bit of excitement to your hunt for a new home this weekend: Interest rates have hit lows not seen since Ozzie & Harriett looked for a new home in the same neighborhood as the Nelson Family.

Of course, it’s been almost as long since mortgages required as much paperwork as they do today!

Freddie Mac Thursday said rates for a 30-year fixed mortgage averaged 4.09 percent, the lowest since 1950 and 1951. Rates back then went to 4.08 percent for several months. Bankrate.com, a well-respected mortgage news Web site, cited rates that were a bit higher, but still at the lowest level since its weekly survey started 26 years ago.

While the pundits are debating the reasons for the low rates, homebuyers should take advantage of them. The pundits agree that the current spate of bad economic news is what’s keeping the rates down, and as soon as some positive news hits the market, they’ll go back up.

While mortgage rates seem to move only little bits at a time, those small figures can mean a lot in what you pay. For instance, if you took a mortgage for $250,000 at the 4.08 percent rate cited by Freddie Mac, you’d pay $1,206.55 per month, principle and interest only. If the rates went up to just 4.19 percent – still a great rate – you’d pay $1,221.08. It’s only $14.53 a month more – dinner at a restaurant, maybe–but over the course of the mortgage, you’d pay more than $5,000 more. And that’s enough to change your qualification status.

If you haven’t already done so, talk with your Realtor, banker or mortgage broker about what rates are available to you in this area, and how you can lock in that rate now…

…Which brings us to the other piece of this discussion: The hoops everyone must jump through to get a mortgage. Anybody who’s stuck a toe into the housing market knows that rates may be low, but it’s not as easy getting them as it was just four short years ago (Making mortgages available without any qualifications is one of the ways we got into this mess to begin with). This, again, is a conversation you need to have with your Realtor, banker or mortgage broker. And, again, it’s time for a cold, hard and unemotional assessment of your situation.

There are some things you can do to take advantage of the low rates.

First, check your credit score for inaccuracies. Each of the credit agencies – there are three – are required to show you your score once a year for free. A good place to start is the Annual Credit Report Service, www.annualcreditreport.com.  

Second, be realistic about what you can afford. One guideline is that your proposed housing expenses, including monthly mortgage payments plus all monthly debt payments, should not exceed 45 percent of your gross income. Like all such guidelines, it merits some discussion and a look at your situation. Your Realtor has special training, tools and insights to help you figure this out.

Finally, see if you can be pre-approved for a mortgage. Again, your Realtor, banker or mortgage broker can help you with this. Having a mortgage commitment in your pocket takes a lot of the guesswork out of the process. You know what you can afford. And a seller would rather negotiate with someone who has already been approved than someone else who’s willing to pay a higher price, but doesn’t have a mortgage locked in.

By the way, this isn’t the time to buy cars or take on other big expenses. Wait until you close on your home and then do another assessment.

It’s true that the banks have tightened the mortgage criteria, but it’s not as bleak as the folks on television would have you believe. Banks are looking for people to give mortgages to.

It may sound trite, but it’s very true: There’s no better time to buy a home. Take the first steps by talking to us or any other Realtor about what you can afford and what homes are available in that price range.

Who knows? You could be celebrating the winter holidays in a new home!