WHAT IS THE CURRENT MORTGAGE INTEREST RATE?

WHAT IS THE CURRENT MORTGAGE INTEREST RATE?

JTS & Co. Mortgage Professionals
JTS & Co. Mortgage Professionals
Published on November 10, 2022

WHAT IS THE CURRENT MORTGAGE INTEREST RATE?

What is my best interest rate?

Buying a home is not the easiest task to accomplish.

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Where do I even begin?

And then when you get into the process how do you know if you are getting a fair interest rate and the right mortgage loan for you?

What is a fair or acceptable interest rate anyways?

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Aren’t all the rates the same?

“I don’t understand finances, just give me what you think is best.” "just push this button and it will just work out.”

All the advertising out there says it is easy. It’s not easy when you try to do it on your own.

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But it’s also not difficult with the right guidance.

for the past 27 yar
For the past 27 years, we have helped thousands of home buyers just like you get their questions answered.

Our #1 objective is to help you get YOUR best mortgage interest rate and to make sure your mortgage is structured to help you meet your goals and objectives.

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Too many people pay more than they should for their mortgage because the lender didn’t take the time to understand their unique situation.

At JTS & Co. we help you get the best loan for your needs, so you’re set up for long-term financial success.

 

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SHOULDN’T THE MORTGAGE INTEREST RATE BE MY MAIN FOCUS?

Interest rate seems to be the primary focus when considering a mortgage or any long-term financing option.

While it is important it is not always the most important.

Nevertheless, this is where the mortgage industry through advertising and marketing has led the borrower to focus.

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If you call up any lender and ask them what their mortgage interest rate is they will gladly quote you the lowest rate available.

But the lowest rate may not be your best option.

I know that sounds wrong but, in this article, I will endeavor to explain and hopefully give you a better understanding of what goes into your mortgage interest rate.

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WHAT DETERMINES WHAT INTEREST RATE I WILL GET?

The first thing to know is that in today’s world many factors go into your specific interest rate.

• The type of mortgage loan you are getting (Conventional, FHA, VA, USDA, or Non-QM),
• the term of the loan, 30 years, 25 years, 20 years, 15 years, 10 years
• how much you are borrowing relative to the purchase price or appraised value (otherwise known as LTV or loan to value)
• your credit scores
• your loan amount
• your loan purpose (purchase, refinance, or cash-out refinance, construction)
• your occupancy status
• how long do you want to lock in your interest rate

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All these questions must be addressed when determining your interest rate.

In addition, the timing of the mortgage markets otherwise known as bond markets plays a part in your interest rate.

Therefore, if you call up any lender and ask them what the interest rate is and if they give you a quote without asking you any questions this should be an area of concern.

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Without talking about specifics, there is no way to know your specific interest rate.

It is so important to sit down with a trusted adviser when you begin the homeownership journey.

Whether you are purchasing a home for the first time, if it is your third or fourth time, or if you are refinancing your existing mortgage talking with someone you trust who will take the time to explain your specific information is something you deserve.

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Is the Lowest Mortgage Rate My Best Option?

my best option
This article started with the statement “the lowest rate may not be your best option.”

The lowest rate comes with a cost in the form of discount points.

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Discount points are a charge to buy down your interest rate below what is called the par rate.

The par rate is the rate your lender can offer you without any additional charges.

Discount points are a percentage charge of your loan amount to buy down the rate below par.

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Typically discount points are 1% of the loan amount although they can come in 1/8% increments.

For example, if you were borrowing $200,000 a 1% discount point would be $2000 in additional closing costs.

The lowest rate may cost 2, 3, or even 4% in discount points.

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But want the lower interest rate to save me in the long term?

That depends. When considering discount points, you must take into account how long you anticipate remaining on this mortgage.

In the mortgage industry, we know that the average mortgage only remains on the books for 5-7 years.

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Borrowers either sell the home or refinance it into another mortgage.

For many buying a home is for a short duration due to job expectations, growing family size, etc.

Therefore, if 1% cost $2,000 to buy down your interest rate by 0.5% and you saved approximately $65 per month for example your break-even would be 31 months.

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Thus, if you plan to remain in the home for 3-5 years, the additional cost to buy down the rate may not be justified.

If you are planning to remain in the home for a longer period, then it may be worth it.

Again, working with a trusted adviser that understands your goals can help you structure your loan and get you your best mortgage rate.

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How Does Cash to Close affect my Mortgage Interest Rate?

 

Another reason that the lowest mortgage rate may not be your best solution is in terms of cash to close.

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When you close on a mortgage transaction in particular a home purchase you have out-of-pocket expenses in addition to your down payment, called closing cost, and pre-paid items.

These closing costs include items such as:
• appraisal fees
• underwriting
• attorney fees
• credit reports
• title insurance
• recording fees
• as well as others that could be specific to your mortgage loan

These fees can add up quickly.

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Pre-paid items are charges to pre-pay your homeowner’s insurance for the first year and to establish your escrow account for future payment of insurance and property taxes.

You can usually estimate 2-5% of the loan amount to cover these charges.

While the seller in many cases is willing to pay these to sell their home that is not always the case. When the seller does pay your fees, it is referred to as seller concessions.

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So, in addition to your down payment, if you have one, you may have to come out of pocket to pay the closing cost and pre-paid items.

This is where your mortgage interest rate can become a tool to help you become a homeowner.
short on funds
If you are short on funds to close many lenders offer a lender credit to help offset some if not all of these charges.

The higher the interest rate the more lender credit can be provided.

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Just as in the case of discount points as you move up in interest rate the yield associated with that interest rate increases.

Your lender may be able to offer you a 1% or 2% credit, or more for a small increase in the interest rate.

Sometimes a ¼% to ½% increase in your mortgage rate can give you enough credit to help you close on your home.

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Again, assuming a $200,000 loan 1% would give you $2000 to help pay your closing cost and pre-paid items. 2% would give you $4,000.

The higher interest rate would cost you more over the entire term of your mortgage loan than the $2000 you received in a lender credit so again you have to consider your goals, objectives, and present circumstances to determine what is best for you.

Assuming that the average mortgage gets refinanced or sold in 5-7 years the higher rate may not be as big a factor.

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If you use the same hypothetical $65 difference over 48 months (4 years) the additional $65 higher payment would cost, you $3,120 and after 30 months it’s costing you in terms of the monthly interest cost.

If you were able to get 2% or $4,000 credit you have approximately 60 months to work with.

In either case, if interest rates were to improve you could consider a refinance option to bring the rate and the long-term interest cost down.

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Your best mortgage interest rate can be a tool to help you accomplish your goals.

I am a firm believer in working with someone you can trust and who will listen to your goals and concerns.

There are a lot of ways to structure your mortgage.

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Having options and understanding those options will set you up for long-term success.

When it comes to your mortgage don’t just accept the “lowest rate” it just may not be your best mortgage interest rate.

 

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Want I get the best mortgage interest rate if I shop around?

 

I shop around
One last thought when it comes to your best interest rate as you shop around.

It is almost impossible to compare apples to apples.

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What I mean by that is that unless you get a quote from different lenders at the same time, on the same day, with the same construct you are going to get different answers.

The reason for that is that the mortgage market is in a continuous state of flux.

The bond market, which is what drives mortgage rates can change two, three, four, or more times in a given day.

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So, if you get a quote from one lender at 10 and then you call another that afternoon or the next day you are not going to be comparing apples to apples.

Again, and I cannot stress this enough when it comes to a mortgage having someone you can trust advising you is so important.

The long-term implications are too great!

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WHAT IS YOUR BEST MORTGAGE INTEREST RATE?

 

When it comes to your home mortgage, we know you want to be confident in your decisions. For that to happen you need to get the best loan for your specific needs.

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The reality is, most people don’t fully understand how mortgages work.

Not to mention, most lenders don’t take the time to help you understand your options.

Not only does this leave you feeling stressed and alone while navigating an unfamiliar process, but it also leaves you at risk of paying more than you should.

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At JTS & Co, we believe you deserve the support of mortgage experts who will listen to your needs and guide you every step of the way.

We get it — the mortgage process can be stressful.

That’s why in the last 27 years, thousands of homeowners have trusted us to help them get the right loan for their needs.

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We will put those years of mortgage experience to work with your best interest in mind.

The process is simple:
1. Get pre-qualified.
2. Complete the loan process.
3. Close with confidence.

Don’t risk paying more than you should with the wrong loan for your needs.

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Instead, get your dream home with a mortgage that sets you up for long-term financial success.

Click one of the buttons below to start your homeownership journey today.

Apply Now

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JTS & Co. Mortgage Professionals
JTS & Co. Mortgage Professionals
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