|mortgage document (Photo credit: TheTruthAbout)|
However, before you rush out to buy that dream home you think you can afford now, there are a few more things you should know about mortgage rates. Your mortgage rate never comes without strings, so knowing about the fine print is important before you make any commitment. All across the country, several home owners suffered from foreclosures due to being unable to pay off their mortgages, so you need to make sure that you get a mortgage rate that your income and financial position can sufficiently pay.
In general, the longer your lease, the higher your mortgage rates. The average 30 year loan has a mortgage rate of 3.32% right now. The 15 year loan has significantly lower mortgage rates. However, shorter loan terms mean higher recurring loan payments, so you have to see whether your wallet can afford that. You may get a better mortgage rate, but making a larger payment may not be possible for you. The other important thing to consider with a mortgage rate is the down payment involved. The best mortgage rates usually come with the highest down payment, so the amount of hard cash you have in the bank right now could be an issue. You could get a great mortgage rate if you can make a large down payment, but that is not possible for every person in the market for a house.
If your down payment falls below a certain percentage of the total loan amount (usually 20%), you can also get slapped with a private mortgage insurance, which is basically an addition to the interest rate you are already getting. This will jack up your overall mortgage rate because you are viewed as a risky borrower by the bank if you cannot make the minimum down payment.
Compared to 1984, when mortgage rates were on the order of 14%, today’s rates of 3 to 4% may seem incredibly tempting to many people looking to buy a home. This may well be the time for you to purchase your dream house, but make sure that your down payment and mortgage rates are friendly to your wallet over the years. Make sure to take in account any unexpected expenses that you may be faced with over the years and leave yourself with enough savings for a rainy day.
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