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Customize Your Mortgage Rate for a Better Deal

SAN FRANCISCO — Mortgage interest rates are going up, but there are some moves homebuyers can make to bring their personal mortgage interest rates down. Mortgage rates are not one size fits all. Homebuyers need to compare rates from different financial institutions. When comparing rates, they are looking for the lender who is giving the best discounts for their situation.

Anyone who has ever shopped for a home, has, in all likelihood, shopped for a mortgage too. When shopping, news reports aren’t much help. Headlines are screaming, “Rates hit 5.27%,” but then the next headline declares rates have “dropped.”

Keep in mind those headlines are just a general guide to mortgage rates and have little to do with the rate you’ll pay. That makes shopping for a mortgage tough, especially for first-time homebuyers like Charlie and Katie Henderson of Concord.

“It was crazy how, like, the numbers fluctuate if you want to go with the lower interest rate, but then you’re paying more fees.” Charlie said. “I didn’t even know what these fees were…”

Just like most mortgage shoppers, homebuyers should go online and look at all those interest rates, monthly payments and fees.

Solidify Mortgage Advisors loan officer Joseph Rivera tells homebuyers not to get bogged down with what they read in most media reports about current mortgage rates.

“Contrary to popular belief,” Rivera says, “every interest rate that a homebuyer ends up with is pretty much custom-made or tailored to their specific situation.”

When homebuyers read a mortgage rate online or hear one on a TV news report, they need to keep in mind that it is an average or a median rate and it is likely not what you’ll pay.

“The lender will evaluate what they consider the perceived risk; the higher the risk, the higher the interest rate,” says Rivera, “And the higher the cost will be to the borrower.”

Now that is something you can work with. Here’s how to beat down your mortgage interest rate.

A good credit score lowers your mortgage interest rate; so does a smaller loan amount. A big down payment can drop your interest rate, too. Your “debt to income” ratio — how much you owe versus how much you earn — plays a part in the interest rate you will be offered. Also buying a single family home versus a condo can drop your interest rate.

Home mortgage rates just hit 5% for the first time in more than a decade. That means the monthly cost of buying a typical home has surged by more than a third over the past year.

Homebuyers can’t control what the Federal Reserve does or how major banks act, but they do have some control. Each small tweak to your individual position can potentially knock down your interest rate by 1/8th of a point… and an eighth of a point here and an eighth of a point there can add up to significant savings.

“So it all depends,” Rivera says, “but in general your concept is correct. All those things that you can do to reduce the risk to the lender will be rewarded in the pricing.”

Really work it, and you can drop your interest rate by a half, maybe even one full percentage point. Over thirty years that is real money. The important thing is getting together with a good loan officer and going over all of these little tweaks.

Robert Egeland

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