When to Lock in Mortgage Rates

With mortgage rates making huge swings over the past 15 years, it can be tough to decide if you should lock in mortgage rates or wait and hopefully get a better deal later on. Over the last 5 years mortgage rates have been historically very low and over the last 2 years they have been at almost record low levels. With the financial crisis that started in late 2008 and still is ongoing into 2009, you can find mortgage rates at close to 5% for an owner occupied home - though most of the time that requires 20% to get that rate.

Your own financial condition will dictate whether or not you should wait to lock in a particular mortgage rate. If you are planning to buy a home and only stay in it for 2 or 3 years then worrying about an extra 1/4 percentage point on your mortgage is not really worth it because the money on the loan is inconsequential. Now if you know you are going to be in your home for 30 years, then getting that extra 1/8th of a point deduction on your interest rate is a huge deal.

Mortgage rates are close to their record lows. It’s really not worth waiting an extra few months for a lower rate, because you’re never really giong to beat 5% or 5.25% interest rate on an owner occupied home. If you wait you may see rates jump to 6% and then you’re paying a lot more over the life of your loan. Most of the time it makes sense to act right away, because if you wait to get better rates you’ll just be second guessing yourself if they go up.

When you find a house or townhome that you like you have the option of locking in current rates, letting them float for a couple weeks or you can take out an adjustable rate mortgage, (ARM) instead of a traditional fixed rate mortgage. With the downturn in the housing market it is getting hard to find ARMS, because banks and mortgage brokers have been much more reluctant to lend that money, because many people that are interested in ARMS are subprime borrowers.

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Are Bad Credit Loans Still Available?

There are rules that can help you find out if you qualify for a low or bad credit loan from a local bank. Many of the rules that banks will use are based on quanitiatve factors such as your credit score and your ability to pay down debts.

If you are considering buying a new condo, home or townhouse and you have a credit score under 600, chances are you will need to get a bad credit loan. Given the credit collapse that happened in the latter half of 2008, there is also a good chance you will be required to come up with at least 20% of the downpayment. This strict requirements freezes a lot of first time buyers out of purchasing a home, but it is not impossible. The lesson here is to save up as much money as you can so you can afford a reasonable downpayment and also get yourself a lower interest rate in the process.

In 2006, there were tons of subprime loans that were available for just about anyone that wanted one. Now here in 2009, the subprime market has dried up, so the real lesson is to try to get your financial house in order before applying for a loan.