Strengthen your credit. Your credit score, loan-to-value ratio, and debt-to-income ratio are all considered by the lender. It’s easiest to look at it this way:

• The higher your credit score, the better.
• The larger your down payment, the better.
• The lower your monthly debt payments, the better.

The lowest interest rates are awarded to borrowers who have the very best credit, and the lowest risk profile. Mortgage underwriting is complicated, and involves more than the items above – but this gives you a good start!

Pay attention to rates. Each week, Freddie Mac publishes the Primary Mortgage Market Survey (PMMS), which shows the national average for mortgage interest rates. This snapshot includes three main mortgage types. It includes the average points, if any, lenders are charging to issue those rates. As of November 21, 2018, the PMMS looked like this:

30-year fixed-rate mortgage = 4.81% with 0.4 points

15-year fixed-rate mortgage = 4.24% with 0.5 points

5/1 adjustable-rate mortgage = 4.09% with 0.3 points

These rates are subject to change daily, and are for example purposes only.

Consider your mortgage loan options. While the 30-year, fixed-rate mortgage is popular, you’ll enjoy a lower rate, and pay less interest overall with a 15-year mortgage. Keep in mind, the shorter term will mean a larger monthly payment.

You can consider adjustable-rate mortgages, which offer low introductory rates. In the example above, the 5/1 ARM means your interest rate stays the same for the first five years. Afterwards, it will adjust every year for the remainder of the mortgage.

Do the math on mortgage points. A point equals one percent of the principal amount borrowed. When you pay points, you’re basically paying interest in advance. In return for this up-front money, the lender grants you a somewhat lower mortgage rate. As you saw in our PMMS rate examples above, points may be shown in any fractional amount.

Points are paid at closing with other out-of-pocket costs. If you wish, you can opt to “roll” your points into the mortgage loan with other closing costs. Remember that paying points at all is completely optional!

Lock the rate. A rate lock means your lender promises to honor the offered rate for a specific amount of time. This protects you from the daily changes in rates that happen in the financial markets. Generally, the rate lock gives you enough time to get through the closing process.

When you’re happy with the mortgage offer, and you don’t want to gamble with the future rate environment, lock it in! But if you think rates might be heading lower, you can opt to wait a bit, or try shopping rates with another lender. (Remember, your personal creditworthiness plays a large role in the rates you’ll be offered.)

Educate yourself! Our free e-book explains these matters in detail! Obtain your copy of “How to Buy a Home like a Pro” by clicking here. There’s no charge, no obligation, and we never share your email address with anyone else.

As your Exclusive Buyer’s Broker, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times.

Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Broker, CEBA-M, MCNE, CSP, PSA,e-PRO, CREM, ABRM, AHWD
Buyer’s Resource Realty Services, www.buyershome.com
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

The post Mortgage Strategies for Columbus Home Buyers appeared first on Columbus Ohio Real Estate | Buyer's Resource Realty Services.

Most notably, mortgage interest rates are rising. As of September 27, the average interest rate on a new, 30-year fixed-rate mortgage was 4.72%. About a year ago, the average rate on this mortgage was 3.83%. While the difference is slightly less than 1%, it has an impact.

For example, a $300,000 mortgage at 3.83% would give you a principal and interest payment of $1,403 a month. If you made this monthly payment each year for the full 30-year loan term, you’d repay a total of $505,080. ($300,000 to principal, with total interest paid of $205,080.)

Borrowing $300,000 with a rate of 4.72% gives you a principal and interest payment of $1,560 a month. The higher interest rate costs you $157 more per month! Over the life of the mortgage, your total repayment would be $561,428, meaning you’d pay $56,348 more in interest.

On another front, higher mortgage rates mean that debt-to-income ratios can be harder to meet. During the mortgage underwriting process, your gross monthly income is compared to all of your monthly debt payments – student loans, credit cards, car payments, ect. This is known as “front-end” DTI. Next, the lender adds your projected mortgage payment into the mix, for the “back-end” DTI.

In the most generous underwriting criteria, your back-end DTI cannot exceed 50% of your gross monthly income. Naturally, the higher the mortgage interest rate, the higher your DTI will be.

But when interest rates are rising, a variety of consumer debts also see higher rates and higher monthly payments. If you are carrying any credit card balances, student loan debts or other loans with variable-rate interest, you’re likely to be paying more for them. When these monthly payments rise, it affects your DTI – not to mention your wallet!

If you’re unsure of the rate and terms on your current debts, now is the time to examine them and create strategies for paying them down. Reducing your variable-rate consumer debt will save you money, and put you in better shape for mortgage approval!

As your Exclusive Buyer’s Broker, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times.

Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Broker, CEBA-M, CNE, CSP, PSA, e-PRO, CREM, ABRM, AHWD
Buyer’s Resource Realty Services, www.buyershome.com
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

The post Columbus Home Buyers Should Prepare for Higher Interest Rates appeared first on Columbus Ohio Real Estate | Buyer's Resource Realty Services.