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60 Second Guide to Calm You Down When Current Mortgage Rates Take You on a Roller Coaster Ride

Posted by  on Apr 01, 2010
 

Mortgage Rates Inch Below 5.00%, Then Climb Back Up Just as Quickly

In the second quarter of 2009, borrowers saw mortgage rates reach their lowest levels in about 50 years--about 4.5%. But in then they quickly jumped to to mid 5% rates, made a quick dip to just below 5%, and then have moved slightly upward since.

Other Factors That Can Help Cut Your Monthly Mortgage Payments

While these other factors can cause more stress for some, borrowers should also keep in mind there are other ways to secure the best mortgage. First, taking care of your credit score and debt-to-income ratio can have a significant effect on your monthly mortgage payment. One way is to review your credit history months in advance, and pay off any existing credit card balances if possible. Interestingly, the difference between high risk and low credit borrowers can be only a few points on the scores and can make much larger differences in the actual rate offered than small movements in the interest rate markets. Most importantly, borrowers have more control over these factors.

Additionally, reviewing these key elements beforehand can help put your mortgage in better perspective. Catching the lowest mortgage rates can make for great water-cooler bragging rights, but beyond that, the normal fluctuations seen during the mortgage process will rarely result in life-changing consequences for the homeowner. Remember, there's a difference between borrowers who wait for the best mortgage rates to simply score a great deal, and those who have to hope mortgage rates drop so they can actually qualify--don't be the latter.

Interest Rate Locks Can Give You Breathing Room

If you still can't handle the mid-day swings, mortgage rate locks come in a variety of options with different mortgage lenders. Typical rate locks can be as short as 7 to 15 days, while extended rate locks of 30 to 45 days can put you more at ease. Keep in mind the longer your rate lock, the more it costs--the rate offered for 15 days may be .25% lower than the rate offered for 60 days. Additionally, some lenders offer a "float-down." You get the rate you lock today unless rates go down when you close--then you get the lower rate. Of course, there is a fee for that so decide if the peace of mind is worth it. And instead of nervously waiting for the next mortgage rate prediction, preparing for the mortgage process by comparing lenders online and reviewing your credit history.

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