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Mortgage rates rising: Last chance for great rates?

[Feb 14, 2011.]


Mortgage rates are rising. HSH Associates reports a combined average rate of 5.33 percent for the week of February 7. This represents an increase of 16 basis points for a 30-year fixed-rate mortgage. Long-term interest rates are connected to commodity prices, which are also rising, according to an NPR report. It's not too late to find an affordable mortgage loan or mortgage refinancing, however, so don't miss out on a good deal by focusing on mortgage rates alone.

Mortgage loans: tips for comparing mortgage quotes

Requesting online mortgage quotes allows for comparing several quotes within the privacy and comfort of your home. In addition to mortgage rates, which are highly promoted by mortgage lenders, it's important to review each mortgage quote line by line.

Here are some key areas to focus your attention:

  • APR vs mortgage rates: The annual percentage rate, or APR, is the total of all finance charges associated with a mortgage loan expressed as a percentage of the mortgage amount quoted. APR includes lender fees and charges as well as mortgage interest. This provides a more accurate estimate of what a mortgage loan costs than current mortgage rates alone.

  • Mortgage type: How a mortgage is structured impacts how much it can cost. A fixed-rate mortgage is fully amortized and has consistent scheduled principal and interest payments throughout the repayment term with a decreasing loan balance each month. Adjustable rate mortgage loans, also called ARM loans, typically offer low initial payments but at some point, the mortgage rate is reset to fluctuate in connection with a particular financial index. It's also possible for ARM loans to include deferred interest, which may be added to the mortgage balance. This increases your mortgage debt rather than decreasing it.

  • Lender fees, charges, and points: Mortgage lenders charge origination fees, document fees, and may also charge "points." One point is equal to one percent of the mortgage amount you're borrowing. Points may be charged for locking in a low mortgage rate, or if you have sketchy credit. A low mortgage rate may not be the best deal if lender fees and points whittle away potential savings.

  • Concerns and questions: Reading through mortgage quotes can be tedious, but it also prompts questions and concerns. Make notes while reading mortgage quotes, and have your questions along with pen and paper handy when discussing potential mortgage loans with lenders.

Shopping mortgage loans before looking for a new home can reduce the pressure of searching for a mortgage loan after making an offer on your next home.


About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.

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