Opes Advisors has helped thousands of home buyers since our beginning, each one special, each one unique. But they do have some common traits. When shopping for a mortgage, most clients think about the size of their monthly payment. There are many other factors to consider, and here we present six additional questions this week and next that your Mortgage Advisor will work with you on before closing.
- “What interest rate can you offer me?”
This is the number one question everyone wants to know. What you may not know is that even though available mortgage interest rates are standard throughout the industry, the rate that you’re given can fluctuate. Your rate will depend on your personal finance history. The best interest rates are still available for those with high credit scores. If you need to improve your score a little before you apply, you can do so by remembering to make your credit card payments on time, every month, pay more than the minimum balance, so that your score will rise as you pay down your debts.
- “Does the rate come with points?”
Also known as “buying down the rate,” points are fees that you can pay your lender at closing to secure a lower interest rate and, by extension, lower your monthly payment. One point equals 1% of your total mortgage value. The rate by which your interest decreases is not standard, however. If you’re considering paying points, it’s important to look at how long it will take you to recoup their cost. To find your break-even period, simply divide the cost of the points versus how much you’ll save on your monthly payment. The resulting number is the number of months it will take for you to get back your initial investment. If you plan on staying in the home for longer than that amount of time, points may be a worthwhile expense. If you plan on moving sooner, however, consider putting that money towards your down payment instead.
- “Is it a fixed-rate or adjustable?”
These days, most would-be homeowners are going for fixed-rate mortgages, or ones where the interest rates stay the same over the length of the loan. If you’re thinking of choosing an ARM, your Mortgage Advisor will discuss how long the initial, fixed-rate period last, how often the rate will adjust, how the adjusted rate is calculated, and what the rate cap is. From there, work with your Advisor to weigh the benefits and risks to determine which rate structure works best for you. Consider how long you’re planning on staying in the home and the frequency at which your rate will climb if you end up overstaying the fixed-rate period.
Check back next week, as we answer 3 more top questions to ask before buying! Until then, contact one of our Mortgage Advisors to get started.
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Opes Advisors, a Division of Flagstar Bank | Member FDIC | Equal Housing Lender