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Like it or otherwise, your mortgage rate will help to determine precisely how affordable your dream home really is. If you are not really a math whiz, you will find 3 what exactly you need to know about mortgage rates:
1. Lower rates might be good for your wallet, although not for the economy
Checking the country's average home loan rates is like checking your money online -- the lower the numbers are, the worse situations are.
Lower mortgage rates are utilized to try to jump-start the housing industry. They're said to be a motivation to get individuals to buy. So, a high level buyer, seeing lower rates is a good thing. However, a high level bank, it's something you don't want to see.
How low are things at this time?
As of August 20, 2012, the average rate on a 30-year mortgage was 3.62%. Rates have been on an upswing since August began. However, those increases come on the heels of the 3.49% average after July -- the cheapest rates on record. In fact, 2012's mortgage rates happen to be historically low all year long. The typical 30-year rate hasn't been above 4% since mid-March -- and then, it only spent per week at 4.08%!
2. Your credit score plays a role in your specific rate
As tempting as that 3.62% might be, keep in mind that it's only a typical. When the banks think you are a risk, they'll make you pay a higher rate. To determine how risky you are, your lender will take a long look at your credit score.
So, how good does it need to be?
Typically, in case your credit score has ended 740, you'll get the most effective rates that your lender can provide. The low yours dips, the more interest you'll pay. Actually, the difference between a good score along with a bad it's possible to be as much as 1.5%!
But that magical credit score isn't everything lenders are looking at nowadays. They're also taking a look at what kind of debts you have. Actually, certain credit is visible as "bad" credit. For instance, for those who have credit cards from every mall within the mall, it is going to look worse to some lender than someone who's got student education loans and car payments.
3. There are many methods to lower your mortgage rates
Should you sign up the dotted line now -- along with a great rate arrives inside a couple of years -- you can always refinance. Actually, the average mortgage is refinanced within 10 years, so don't hold off purchasing a house now because you're worried that something better can come along later. Instead of simply waving as that rate plan passes, you can make the most of it if you want to.
If you haven't been approved for a financial loan yet, think about a 15-year mortgage rather than a 30-year one. As of mid-August 2012, the typical 15-year mortgage rate sat at 2.88% -- nearly a full percentage point less than its 30-year counterpart. If that doesn't appear to be much of a difference, remember than a fraction of a percent difference can result in a large number of extra dollars each year!
If you've investigated 15-year mortgages -- and the rate still is not as little as you would like -- consider "buying down". Essentially, you hand over money towards the bank right now, as well as in exchange, they give you a lesser rate.
Or, if you've got a lot of money saved up, consider putting more income down on your new home. The higher you can get over a 25% down payment, the much more likely banks will be to cut you a break on interest. However, some banks won't provide you with a preferred rate unless you put down 40%, so make sure you ask them first and write the check second!
