Mortgage rates rise for week of January 17, 2011

Mortgage rates moved up last week; HSH Associates reports average combined mortgage rates for fixed-rate mortgage loans moved up by six basis points to 5.11 percent for a 30-year fixed-rate mortgage (FRM) while the average combined rate for a 15-year FRM increased by three basis points to 4.46 percent. The average combined rate for a 5/1 adjustable-rate mortgage (ARM) ticked upward by one basis point to 3.82 percent.

With low rates like this on the table, you may be looking into getting a mortgage or refinancing.?? Here are some tips for selecting your best home loan option.

Finding your best mortgage loan match

Choosing between an FRM and a variety of ARM loans may seem complicated, but your choice largely depends on individual circumstances. These considerations are helpful for selecting a mortgage loan meeting your needs.

• How long you plan to stay in your home. If you're buying a starter home, or are refinancing a home you may sell within a few years, an ARM mortgage may provide a lower mortgage rate for the few years you'll be in the home. Watch out for "exotic" mortgage terms that can increase your loan balance, and prepayment penalties that reduce sales proceeds or increase costs when refinancing.
• How you will pay for your down payment and closing costs. If you're short on cash, but want to get in on today's lower mortgage rates, consider buying a home with an FHA loan. Another option is first time buyer programs through state and local housing finance agencies. Housing finance programs provide low cost loans for funding most up-front mortgage costs. Housing finance programs typically require a minimum of 3 percent cash down, while FHA requires 3.5 to 10 percent of your down payment depending on your credit scores. Scores of less than 580 require 10 percent down, while scores of 580 and more qualify for 3.5 percent down.
• How quickly you want to pay off your mortgage. Consider refinancing from a 30-year ARM or FRM mortgage to a 15-year FRM loan. Lower mortgage rates are making shorter repayment terms and fully amortized FRM loans are now affordable for many homeowners.

Our live database of current mortgage rates can help you find the best mortgage rates in your area.