Tuesday, December 07, 1999 -Inman News Features
Less
is more with interest rates
Affordability increases as interest rates decrease. Affordability
also increases if you use an adjustable rate mortgage rather than
fixed-rate financing because the lower initial adjustable interest rate
makes qualifying easier. There will be a range of prices you can afford
depending on what kind of financing you choose.
Not even the Fed knows for sure
Mortgage interest rates are affected by many unpredictable political,
economic and social events. So there is no guarantee what direction
interest rates will go, despite the forecasts of the experts. Therefore,
make your financial decision based on where things are today including
your budget, your needs and your future plans.
Step lively to lock in
If you do decide you want to lock in at a certain interest rate, get
a completed loan application to your lender as soon as possible so that
your commitment doesn't run out before your loan is approved. Follow up
and make sure any additional documentation required by the lender
(employment and deposit verification) is sent without delay. Have the
loan agent order the property appraisal right away, which probably will
require you to pay an up-front fee of approximately $300. Make sure that
payoff demands from existing lenders are ordered in time. Existing loans
must be paid off before a new first loan can be secured against the
property.
Writing interest guarantee into
contract
Although most sellers will attempt to accommodate buyers who are in
jeopardy of losing an interest rate, a seller doesn't have to agree to
do so unless it's part of the purchase agreement. One way to insure that
the sellers will cooperate is to include a provision in the original
purchase contract that requires them to close early, if necessary, in
order for you to preserve an interest rate. Give the sellers the option
to rent back at a cost equal to your principal, interest, property tax
and insurance payment if they can't vacate before the contract closing
date.
Negotiating a buy-down with a
lender
Most lenders will allow you to design your own buy-down loan. That
is, you can decide how long you want the interest rate to be reduced,
how much the rate will be reduced, how many points you'll pay and how
often the interest rate will adjust (for example, every 6 months or
annually). It's possible to pay fewer points for a buy-down in exchange
for a higher interest rate and/or a shorter buy-down period.
Buy-downs cut both ways
Buyers who don't intend to own their homes for very long will
probably save money by taking an adjustable rate mortgage rather than
paying the cost to buy down an interest rate. Sometimes, however, a
seller or builder may be willing to pay the up-front buy-down fee for
you. When real estate markets slow, you'll find more sellers willing to
pay to buy down a rate for a buyer. But, if you can qualify for a loan
without a buy-down, you'll probably be better off negotiating a lower
purchase price rather than asking the seller for a buy-down concession.
Try not to obsess about interest
rates
Although rising interest rates can add stress to the home-buying
experience, waiting for rates to come down may not be the answer. You
could pay a higher price later, and you can always refinance if interest
rates come down.
Copyright 1999 Inman News Features
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