Interest Rates

Low Interest Rates

Today the interest rates charged on fixed-rate mortgages are the lowest they have been in decades. That's good news for potential home buyers. Even better news is the fact that the interest charged on some Adjustable Rate Mortgages (ARMs) is at a level not seen in four decades. However, you should be cautious if you choose an ARM.

First, keep in mind that the ridiculously low rates offered on ARMs usually are guaranteed just for the first year.

You should also be aware that, because of the potential for volatility, lenders will usually require that you qualify for a mortgage loan several percentage points above the actual initial rate charged on the ARM. This is intended to eliminate marginal borrowers from becoming overburdened by debt. You should also be on the alert for lenders who charge special fees or caps that can increase the cost of the loan to you.

When you are buying a new home in the Overland Park area or refinancing your present one, it is smart to do some comparison shopping among lenders. A low interest rate isn't the only criterion by which to judge a loan. You should also consider the terms of the mortgage, what your closing costs will be and the reputation of the lender.

Realtors are a good source of information about loans and lenders, whether you are buying a home or just refinancing your present home. We routinely assist buyers when they need a mortgage in order to purchase a home. We know what loan packages are available and the qualifying requirements. The companies with the lowest rates sometimes have very conservative underwriting guidelines, and may not be willing to make loans on certain types of property or to buyers who are marginally qualified. We can tell you which companies and loan officers will go the extra mile to provide excellent service to make sure that the transaction closes.

When Interest Rates Rise...

... many people fall out of the house buying market. This is a mistake. Many of the best mortgages deals become available when lenders are competing for new business and sellers are competing within a smaller buyer pool. You just have to know how to keep the costs down in order to counter the higher interest rates.

One of the best tricks is the buy-down. In a buy-down, a fee is paid at the closing to get a lower interest rate. In a soft market, an anxious seller may be lured into to paying all or part of the buy-down. Another approach is to get the seller to pay some of closing costs, thus lowering the amount of cash a buyer needs to close. Frequently the seller's costs can be used as a write-off by the buyer (Check with your tax advisor).

If the market is softening due to rising or higher rates, the price itself becomes an area where a buyer may be able to save a lot of money on a house through some hard negotiating. Lower prices mean lower loan amounts, so don't be discouraged by higher rates--use them to your advantage.