Rates continue to rise: 30-year fixed-rate mortgages continue to rise with rates currently at 7.12%, up from 6.89% the previous week, according to Bankrate data from October 12. The national average for 15-year fixed rate mortgages also rose to 6.33% from 6.09%. (See the lowest mortgage rates you can get now here).
How to get a lower mortgage rate
There are several ways to get a rate well below 7%. First, shortening your loan could help you save money, as 15-year mortgage rates continue to be lower than 30-year mortgage rates.
It may also be worth considering an adjustable rate mortgage (ARM), if that suits your long-term plans. The latest Bankrate data shows that average rates on 5/1 ARMS (rates are fixed for five years and then adjusted) are 5.36%, considerably lower at the start than 15- and 30-year fixed rate mortgages. ARMs often make the most sense for short-term homeowners who only plan to stay in the same home for 5-7 years. As ARM rates become variable, “ARMs can be risky, and in the long run, they may end up costing more than a fixed mortgage with a higher starting rate,” analyst Jacob Channel said recently. LendingTree’s main economics, at MarketWatch Picks.
It also often pays to shop around and get quotes from 3-5 lenders. And you need to get your finances in order. Determine your credit score and improve it if necessary (a 760 or higher often helps you get the best rates). You also need to determine your debt to income ratio (DTI); To calculate, divide your monthly debt payments (mortgage, credit card payments, car, student or personal loans, child support) by your gross monthly income. If the number you come out with is 36% or less, your chances of qualifying for a mortgage, and at a better rate, are better than if you come out with a higher number like DTI.
You can also lower your mortgage rate by purchasing rebate points, which are fees paid to lower an interest rate. Typically, one point lowers the interest rate by 0.25%, although this may vary. “When you pay cash back points, you’re giving the lender a portion of the interest payments up front in exchange for paying less interest each month,” Nerdwallet home and mortgage expert Holden Lewis recently said. , at MarketWatch Picks. It’s important to note that there may be limits to the number of discount points you can buy, and buying points may not make sense, especially if you’re not planning on staying in the house for long.
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