S.M.A.R.T. Goals

Goals are important. They drive us. However, the achievability of a goal depends on five really important factors. What are these? Read on….

A mortgage rate lock is a financial tool that is provided by lenders to help control the fluctuation of mortgage interest rates during the processing of your loan. Rate locks are generally available between 30 and 60 days, but can sometimes be extended a little bit longer.

INTEREST RATES: Common Misconceptions

Every home purchase involving a mortgage includes two major financial considerations: the price of the home and the interest rate of the loan. How do these two sides of the same coin affect the overall price of a house, and how do they affect your decision to purchase a home? We’ll address any confusion you may have by explaining the dynamic between your interest rate and the price of your home.

If you’re planning to apply for a home loan, it’s likely that you are aware of the fact that mortgage interest rates fluctuate daily. Depending upon market conditions, fluctuations can even happen on an hourly basis. These changes can have an impact on your finances when interest rates spike. To help avoid paying more for your mortgage, you can take advantage of a mortgage rate lock.

How are Mortgage Rates Calculated?

When buying a home, the overall mortgage cost is calculated based on the total amount paid back to the lender over the life of the home loan. The overall cost of the mortgage can vary depending on the interest rates and home prices. In fact, mortgage interest rates and house prices have an inverse relationship: If interest rates are low, but a home price is high, it is possible that the overall cost of the mortgage will be lower than if interest rates were high, but home prices were low. However, there are several additional factors that affect the total cost of the mortgage.

What Affects Mortgage Rates?

A mortgage interest rate can be affected by a concept called mortgage points, where you buy “points” during the mortgage process to help get a lower interest rate. Each point is 1% of your loan amount. You can think of this concept as essentially prepaying a portion of the interest on your loan. However, this works best in favor of homeowners who plan to stay in the home for a long period of time. If you happen to sell your home before paying off the loan, then it’s possible you would have paid more up-front in points than you made up with your reduced interest.

It’s important to remember that advertised mortgage rates may not match the rate you’re qualified to receive. The rate determined by your lender reflects your credit score, the type of home you’re purchasing, the price of the home, your down payment, and even your debt.

Before making a decision to act on a lower mortgage rate, it’s important to first understand how these rates are influenced nationally. While the Federal government does not actually set mortgage rates, it can affect them. The Fed determines the federal funds rate, which impacts short-term and variable rates. When the federal funds rate increases, it becomes more expensive for banks to borrow from other banks. Higher costs may be passed on to consumers in the form of higher interest rates on lines of credit, auto loans and potentially mortgages.

A Good Time to Buy a House

The best time to buy a house is dependent on your financial capabilities and the many factors that affect each particular mortgage. In some cases, a low-interest rate will help with the overall affordability of a mortgage, and can positively influence the manageability of monthly payments. However, if you’re on the fence about buying a more expensive house, consider that the best advice for potential new homeowners is always to purchase a home that you feel is within your range of affordability. With lower interest rates, a buyer could potentially qualify for a mortgage on a home that is priced higher than they initially thought they could, which can be great news! That said, just because you can qualify for a larger purchase price doesn’t always mean that’s the best choice for you.

A buyer should evaluate their proposed mortgage payment and purchase a home at a price that provides a payment they will be comfortable with each month in addition to their existing liabilities.

Furthermore, it’s wise to consider any additional obstacles in your life that may make buying a house risky. These can range from issues saving for a down payment, fluctuations in your job, or recent credit events that may affect your score.

Whether you’re looking to buy a house now or in the coming years, stay aware of the changes in interest rates and include them as a factor when you consider the range of what you can afford.

While it may not be wise to buy the more expensive house, you might be able to afford more than you expected. You may be able to save money to fix up an older home or perhaps buy new construction. If you’re interested in taking advantage of low interest rates.

What’s a Mortgage Rate Lock?

A mortgage rate lock can protect you against paying more money for your mortgage. If you’re looking for more actionable tips on the mortgage process and how to take advantage of rate rock, consider talking to experienced mortgage professionals. They can guide you every step of the way from the initial application until the closing and everything in between, including rate locks. You may also contact me if you want to learn more about mortgage financing. I will gladly refer you to a professional who can provide fair, balanced, and informative options on which you can base your decision.