The Lowest Rates

Finding a mortgage may be even more difficult than finding the right home. It’s a complicated process full of variables. A person may think, for example, that they can afford a $100,000 home. But depending on the current mortgage rate, and the terms of the mortgage, there may be circumstances under which that same home would become unaffordable, even though the price remains the same.

The first thing to do is calculate approximately what your payments would be for your home under different circumstances. Calculate payments at several different interest rates, and determine at what interest rate your mortgage would become unaffordable. For example, your $100,000 home may be affordable with a fixed rate mortgage at 6 percent. But suppose your credit is spotty and you cannot get the prevailing current rate.

A nonprime lender may offer you a mortgage at ten percent. However, your payments would be significantly higher, and this mortgage may well put too much of a strain on your finances, which means you would have to either delay getting a mortgage, or find a cheaper property.

But regardless of your credit, it’s a good idea to keep close track of the current mortgage rate by looking at the published index, either that of the FHFB or a regional index published by a local private company.

Even if you cannot qualify for the published index rate, it will still serve as a guideline as to what you can expect. Even nonprime lenders’ mortgage rates will fluctuate, and will track this published index rate, even though it will always be several percentage points higher.

The best interest rate may be that of an adjustable rate mortgage, but in a period during which the current mortgage rate is low to begin with, a fixed rate mortgage will always be best long-term, even though the ARM’s introductory rate will be lower than that of the fixed.

As with any type of consumer purchase, shop around for your mortgage. Not all banks offer the same rates, even to a buyer with excellent credit, and closing costs may vary.