How to Choose the Right Mortgage Based on Current Interest Rates
Selecting an appropriate mortgage is a task of meeting your financial needs with current trends in the interest rates. The following are the mortgage products available at Reid Temple Federal Credit Union to help members to easily understand the options available to them. It is important to learn how rates affect the cost of borrowing, the different types of loans, and how to plan ahead in order to avoid paying more than necessary in the future.
- Mortgage interest rates meaning
Mortgage costs are influenced greatly by interest rates. Higher rates lead to larger monthly installments, whereas lower rates lead to cheap credit. Check the current rates with the help of RTFCU mortgage specialists or use the Internet resources. Interest rates vary with inflation, action by the Federal Reserve, and other market factors, thus timing is important.
- Check Your Financial Status
Before choosing a mortgage, evaluate your financial readiness by considering:
- Credit Score:
This means that, the higher the score the better the rate that one will be offered.
- Debt-to-Income Ratio (DTI):
Banks recommend keeping DTIs below 43%.
- Down Payment:
Larger initial payments mean that smaller loan sizes and better rates can be locked in.
RTFCU provides options for its members and they can help first-timers or those who have a bad credit.
- Compare between Fixed and Adjustable Rate Mortgage (ARM)
- Fixed-Rate Mortgages:
These have a fixed rate which will give equal payments all through the term of the loan which is advisable, especially where rates are fluctuating or you intend to live in the house for a long time.
- Adjustable-Rate Mortgages (ARMs):
These begin with lower rates which are adjusted at certain intervals, ideal if you think that rates will come down or if you will be transferring within the next few years.
Make your decision depending on how many years you are likely to live in the home and how you feel about fluctuations in rates.
- Consider Loan Term Lengths
Take a longer term of say 15 years and pay less interest with slightly higher interest rate but with lower monthly payments. Those with longer terms, for instance, 30-years mortgage will pay less per month but more in terms of interest. Moreover, RTFCU’s advisors will be able to tell you how to determine the best term given your financial capacity.
- Points and closing costs
Mortgage points are a method of effectively allowing you to ‘buy down’ the interest rate by paying a premium upfront. The only disadvantage of this is that it means more money paid upfront and can be costly in the long-term if you intend to occupy the home for long, and make payments on the loan. On the other hand, the no-closing-cost options may raise the interest rate but lower the initial costs.
- Prescreen and Get Your Rate Locked
RTFCU prequalification offers an approximate of the amount you can borrow and proves to sellers that you are serious about purchasing a home. Also, if you expect the rates to rise before closing, consider fixing your rate. Lock-ins offer protection in home purchasing.
- Understand Market Trends
There is a strong relationship between the mortgage rate and the economic factors. When the rates are going up, it may be most advisable to lock in a rate as early as possible or take a fixed rate mortgage. On the other hand, in a falling rate market, flexible rate mortgages or the refinancing solution could be cheaper.
- Take Advantage of the Membership to RTFCU
At RTFCU, you can get a competitive mortgage rate, personal attention from our members, and helpful tools to help you through the process. Their team can consult you on which mortgage is best suitable for you depending on your circumstances.
Conclusion
Deciding on which mortgage to take depending on the current interest rates therefore needs a lot of planning to achieve your aims. Reid Temple Federal Credit Union offers the service and guidance that will help you make the right decision. Contact RTFCU now to get the best mortgage rate for your dream home.