LOS ANGELES, Feb. 12, 2013 /PRNewswire-iReach/ -- Like it or not, your mortgage rate is going to help determine just how affordable your dream home really is says the real estate experts at RealtyPin.com. Even if you're not a math whiz, there are 3 things you need to know about mortgage rates:
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1.Lower rates might be good for your wallet, but not for the economy
Checking the nation's average mortgage rates is kind of like checking your bank account online -- the lower the numbers are, the worse things are. Lower mortgage rates are used to try and jump-start the housing market. They're supposed to be an incentive to get people to buy. So, if you're a buyer, seeing lower rates is a good thing. However, if you're a bank, it's something you don't want to see. How low are things right now? As of August 20, 2012, the average rate on a 30-year mortgage was 3.62%. Rates have been on the rise ever since August began. However, those increases come on the heels of a 3.49% average at the end of July -- the lowest rates on record. In fact, 2012's mortgage rates have been historically low all year long. The average 30-year rate hasn't been above 4% since mid-March -- and then, it only spent a week at 4.08%!
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2.Your credit report plays a role in your specific rate
As tempting as that 3.62% may be, remember that it's only an average. If the banks think you're a risk, they'll make you pay a higher rate. To decide how risky you are, your lender will take a long look at your credit score. So, how good does it have to be? Typically, if your credit score is over 740, you'll get the very best rates that your lender can offer. The lower yours dips, the more interest you'll pay. In fact, the difference between a good score and a bad one can be as much as 1.5%! But that magical credit score isn't all that lenders are looking at these days. They're also looking at what kind of debts you've got. In fact, certain credit can be seen as "bad" credit. For example, if you have a credit card from every department store in the mall, it's going to look worse to a lender than someone who's got student loans and car payments.
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3.There are several ways to lower your mortgage rates
If you sign on the dotted line now -- and a great rate comes along in a couple of years -- you can always refinance. In fact, the average mortgage is refinanced within 10 years, so don't hold off buying a house now because you're worried that something better will come along later. Instead of simply waving as that better rate goes by, you can take advantage of it if you want to. If you haven't been approved for a loan yet, consider a 15-year mortgage instead of a 30-year one. As of mid-August 2012, the average 15-year mortgage rate sat at 2.88% -- nearly a full percentage point lower than its 30-year counterpart. If that doesn't seem like much of a difference, remember than even a fraction of a percent difference can lead to thousands of extra dollars every year! If you've looked into 15-year mortgages -- and the rate still isn't as low as you want -- consider "buying down". In essence, you hand over money to the bank right now, and in exchange, they give you a lower rate. Or, if you've got a ton of money saved up, consider putting more money down on your new home. The higher you can get above a 25% down payment, the more likely banks are to cut you a break on interest. However, some banks won't give you a preferred rate unless you put down 40%, so make sure you ask them first and write the check second!