Coping with Higher Mortgage Rates

Getting the best mortgage rate can be a challenge for anyone in this economy. Banks seem to be especially picky about who they will lend money to, and even after getting a bank to agree to give you a mortgage, it can be hard to get the amount you need to buy the home you want. With the federal government raising interest rates, it’s now a lot harder to find an ultra-low rate on a mortgage. Fortunately, there are still things you can do to get a low rate, and ways to cope with the rate you get.

Many people resign themselves to getting a mortgage at a higher interest rate than they would normally pay. Unlike other loans, however, mortgages tend to be extremely large loans. This makes a difference of even a tenth of a percentage point a costly proposition for a potential homeowner. Even a small mark-up on the interest rate of a loan can cost a new homeowner thousands of dollars over the life of his or her mortgage.

Fortunately, there are several ways to find good mortgage rates. To start, go online and provide your basic information to websites that compare mortgage rates from a variety of banks. While these websites typically will not get you the lowest rate, they do provide a person with a good place to start. Use this information to determine which banks and mortgage brokers are willing to work with you, and be sure to save their offers for the next step.

After doing this basic search, call a few of the banks with the lowest offers. Also, make sure to call any bank or mortgage broker that you have done business with in the past. Explain to the agency that you’re shopping around for a mortgage, and ask about their current rates. Don’t be afraid to tell the agent that you have received a better offer. Often, terms such as APR, points paid and closing fees can be negotiated with a bank.

Because you will be talking to so many banks and mortgage brokers, make a spreadsheet or other record of each offer you receive. Expect to receive multiple offers from the same bank. For example, many banks will offer a 30 year mortgage with a higher interest rate than a 15 year mortgage. Banks may also offer you adjustable rate mortgages. By keeping one list of all of these offers, along with their payment terms, you will be able to compare the offers easily. A single list will also make negotiations easier.

Finally, don’t be afraid to ask for better terms after you have been approved for the loan and are waiting to close. Banks and mortgage brokers are often willing to offer better terms to people who have waited too long to close and threaten to take their business elsewhere. You should at least have your mortgage agent check to see if APRs have dropped between the time you applied for the loan and the day you close.

If you’re not happy with the interest rate you get, you might be stuck with it for a few months until you can refinance. In order to get a better interest rate, you’ll need to work on improving your credit score and save as much as possible to bring to the closing table. If you are able to show that you can afford the higher payment that comes with a fifteen year mortgage and/or make a significant down payment, then a bank will be better able to offer you a lower rate.

It may be a lot of work to get a good mortgage rate, but it can save you and your family thousands of dollars in the long run.