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Buying a house
now’s the time
By SANDRA R. RICHARDSON
Extension Agent
If you’ve been considering buying a house, now may be the time.
Home mortgage rates are at their lowest level in six years. Lower interest rates along with large numbers of houses for sale across the state have worked together to create a buyer’s market at the present time.
Before signing a mortgage, however, you should check around for the best deal. A small difference in the interest rate can make a significant difference in the amount of money repaid over the life of the loan.
Recent surveys indicate that in some locations, the interest rate may vary even more than one percentage point among lending institutions.
When comparing interest rates, you will probably be quoted “note rate” rather than the annual percentage, usually called the APR.
In addition to the note rate, you will be charged “points.” One point equals one percent of the mortgage amount. You also may be charged loan origination fees and mortgage insurance premiums.
A federal law, the Truth in Lending Act, requires all lenders to follow the same rules when computing the APR. The APR takes these additional charges into consideration.
Be sure that all costs are taken into account when shopping for a mortgage. Be sure to check that there is no penalty for early repayment of the loan.
One of the decisions you will have to make will be whether to get a fixed rate mortgage, called FRM, or an adjustable rate mortgage, called ARM.
Fixed rate mortgages carry a slightly higher interest rate, but the payments don’t change over the life of the loan.
With adjustable rate mortgages, the initial rate of the loan is lower, but the rate may go up or down, depending on prevailing rates. If you get an ARM, be sure to get one that has a cap on the amount that the loan can go up in any one year. There is usually a two percent cap on any increases or decreases.
Wih ARMs, the borrower shares some of the risk of the fluctuating interest rates with the lender. So, the interest rates are lower.
When deciding between an ARM or FRM, individuals should assess their expected degree of financial security in the future.
If you choose a fixed rate mortgage and the rates drop itiore than two percent, then it may pay to refinance. Therefore, even those opting for fixed rate mortgages are not stuck with a high mortgage rate when rates drop substantially.
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