The second half of 2022 saw a changing real estate market with increases in interest rates. Thankfully, rates are currently on the decline! However, we don’t anticipate a return to the historic lows of rates in the 2’s and 3’s anytime in the foreseeable future.
So, what are buyers to do when interest rates rise? We spoke with lender Craig Miller of Guaranteed Rate to find out what questions you should be asking your lender in order to lower your mortgage payment.
Here’s what to ask:
- If you currently have a mortgage and want to figure out if you can lower your rate, first ask: what is my current rate?
- Next, ask: if I pay points for a lower rate, what is the rate and what is the break-even to recapture my “point cost” if I pay the points?
- What is my credit score? If I improve my credit score, will my rate improve? Can you give me advice on how to improve my credit score?
- If you are shopping for a loan ask: if I put less money down, will my rate improve? (Sounds crazy, but you can often get a better rate when you have mortgage insurance. For example, you may be intending on putting a down payment of 20%, however, you may get a better rate at 18 or 19% with mortgage insurance. After the loan closes, then you can pay the mortgage balance down to 80% as you initially intended but now you have a lower rate).
- If you are putting down less than 20% ask: how much is my mortgage insurance? Is there a way to lower my mortgage insurance? (Mortgage insurance is a function of down payment and credit score).
- Do I qualify for a first time home buyer program? (Many of these programs have income limits, but there are times when two borrowers may make too much money to qualify, but your lender can” drop” one borrower and then the other borrower can qualify under their income. This allows you to take advantage of a lower rate and reduced mortgage insurance rates. The borrower removed from the loan can still be on the title and own the house.
While the real estate market is ever changing, you always have options and opportunities as a buyer! If you are looking to buy or sell, we are here to help! If you need an excellent lender, we work with many local lenders who we would love to put you in touch with.