5 Ways to Help Save Money Amid Soaring Mortgage Interest Rates
Mortgage rates have risen to their highest level in 35 years, making buying a home more expensive and potentially more difficult for many buyers, including black Americans.
According to housing finance giant Freddie Mac, the average rate on a 30-year fixed-rate mortgage rose to 5.78% on June 16, 2022.
“Mortgage rates jumped as the 30-year fixed-rate mortgage rose more than half a percentage point, marking the biggest one-week increase in our survey since 1987,” the economist said. in chief of Freddie Mac. Sam Khater declared.
The jump came like the Federal Reserve raised interest rates by 0.75% on June 15, the country’s biggest central bank hike since 1994.
Even with rising mortgage rates, people should keep in mind that they are still much lower than in the early 1980s, when they were around or above 18%. That’s more than three times the fixed rate now. Still, with rates likely to continue to skyrocket, it might be ideal now to consider options to help offset those costs.
Here are some ways to save money and control rising mortgage interest rates:
Ask about an adjustable rate mortgage
It’s a choice some borrowers consider when mortgages go up. The reason being that the rate is lower than a fixed rate loan. The 15-year fixed rate mortgage at Freddie Mac was 4.81%, almost a full percentage point lower than the fixed rate. Some MRAs can last anywhere from three to 10 years. Observers say they could be beneficial if you plan to live in a house for a short time. But be aware that MRAs can pose risks if carried for a long time. So be sure to ask your lender what steps you should take to protect yourself.
Block your rate for a well-defined period
With mortgage rates rising frequently, you might want to lock in the rate once you’re contracted to buy a home and before closing. This could help you avoid paying a higher rate or putting more money aside. Typically, rate locks are valid for 30 days, but can last anywhere from 45 to 60 days, depending on the lender. Be sure to ask your lender for the exact lock-in period to avoid any surprises.
Improve your credit
Before committing to a mortgage, do your research to improve your credit score. This can help you qualify for a loan. Request free copies of the credit report from Equifax, Experian, and Trans Union. By reducing potential risk to the lender, you’ll gain more leverage to potentially get a better rate. Review your report to make sure it does not contain false information. And look for ways to increase your FICO Mortgage Score.
Make a larger down payment.
If you can make a larger down payment, it can potentially lower your monthly payment. If you put down a minimum of 20%, you can increase your chances of getting the best rate and avoid private mortgage insurance. But if you can’t, putting more down can help you get a lower interest rate.
Shop around for a better deal
With mortgage rates steadily rising, people have given up on buying or refinancing. This retreat could cause lenders to be more aggressive in winning your business. Get quotes from at least three to four lenders, including online lenders, credit unions, and banks. Don’t be afraid to negotiate a lower interest rate and lower closing costs.
“The best thing you can do is establish a good relationship with your loan officer at your local bank. Your local lender understands how important it is to look beyond traditional credit scores and will make a extra effort to help you get a better rate and meet the requirements for a better loan.“, said Michael PougPresident and CEO of Carver Federal Savings Bank.
“At Carver, we understand the importance of access to capital and rely on strong personal relationships with our customers and the community to succeed.”