3 Ways To Get Lower Interest Rates When You Buy A Home
Q: I have been saving money for a down payment to buy a condo. I talked to someone at my bank and also a mortgage guy and got two different interest rate quotes. How do I make sure I get the lowest mortgage interest rate? Alan, Edgewater, NJ
A: By approaching more than one financing source, you are on the right track already, Alan. Here are 3 tips to get a lower mortgage interest rate when you buy a home: 1. Shop around (as you are already doing–well done). When interest rates are higher as they are now, there is usually a bigger spread in available interest rates offered by lenders because some lenders increase the interest rates they offer borrower-buyers to increase their profits per transaction while other lenders offer lower interest rates in order to get more market share 2. Get an adjustable rate mortgage. Adjustable rate mortgages normally carry a lower initial interest rate than fixed rate mortgages, however, these mortgages are riskier because your monthly payments can rise if interest rates go higher when the initial adjustable mortgage rate expires–getting an adjustable-rate mortgage is a gamble that probably does not make sense for most home buyers, especially first time home buyers. However, if you have the financial wherewithal to handle the additional risk and can afford a higher mortgage payment if interest rates rise, it may be worth considering. 3. If you buy a new home, ask the builder to buy down your mortgage interest rate. Builders normally pay interest on the money they borrow to build and are normally anxious to sell their projects as soon as they are finished to cut their costs and maximize their profit. Thanks for your question, Alan.
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