Mortgage rates dipped below the key 5% level for 30 year fixed rate mortgages again this week. While many had predicted that rates would rise by mid-2010, it’s looking as though they may stay low at least through the year. The government intervention and reluctance to raise rates given a near 10% unemployment rate has suppressed rates to historically low levels.
How to Beat the Average Rate
A year ago, the benchmark rate was at 5.2% and the record low from December is 4.7%. I had locked into a 4.625% conventional 30 year mortgage with no points in 2009. How? I had the credit score. The key is having a top credit score in order to beat the averages cited above. There’s only one score that counts – the FICO score and there’s only 1 way to get it free (Details HERE). Other scores by other companies aren’t shared cross-company and are useless otherwise, and to pay for them is a complete waste.
No Money Down Loans in 2010?
The new homebuyer tax credit allows first time buyers to realize the $8,000 credit up through a binding contract date of May 1, 2010. Aside from attempting to beat the mortgage averages by having a great credit score, you can actually still get a no money down mortgage. Amazing, right? Well, under an obscure government program, the USDA Farm Loan program allows many people in relatively typical neighborhoods to apply. It was formed under the guise of “rural lending” but many of the suburbs that are eligible are anything but.
40 year Term Mortgage Loans?
If you have the money for a down payment but the monthly payments are going to be tight, there are 40 year mortgages and even longer terms like 50 and 60 year if you can believe it. The longer terms probably aren’t right for most people, especially if paying a higher interest rate, but if the plan is to move or it’s the only way to pull off a payment, perhaps it makes sense.
How to Choose Between Mortgage Options?
I had developed a Net Present Value model for just this situation and I share with spreadsheet with anyone who asks. Check it out since you may have to choose between a better rate or lower points and want to confirm which is the better option in present dollars.
If you’ve already locked into a mortgage rate and these lower rates are enticing, you may be thinking whether to break your mortgage lock. Many people do it and the article within outlines pros and cons.
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