There’s a lot to learn and know when it comes to buying a home, especially for first-time home buyers. And one area in this that causes much confusion is mortgage interest rates. They seem to be constantly fluctuating, and they are different for different types of mortgages. So let’s try to clear some of that up. Read on to find out what first-time home buyers in Atlanta need to know about interest rates.
Current Interest Rates and Implications
A short time ago, mortgage interest fell to near-historic lows. But that has changed – interest rates are now rising. And that is something first-time home buyers definitely need to be aware of and keep track of.
Right now, the average interest rate for a 30-year, fixed-rate mortgage is 6.46%. What this means in practical terms is that for a $100,000 mortgage, you will pay $126,590 in interest over the life of the loan.
For a 15-year, fixed-rate mortgage, the interest rate is right at 5.66%. So for a $100,000 loan, you will wind up paying $48,608 in interest over the life of the loan.
Shop for the Best Rates
Many first-time home buyers simply aren’t aware that they can and should shop around for the best interest rate. Doing so could save them thousands in interest over the life of the loan.
Industry experts recommend that you request loan estimates for the same type of mortgage from multiple lenders to compare costs. Contact a minimum of three lenders to make sure you’re getting the lowest interest rate. If you just go with the first lender you talk to, you may end up losing out on thousands of dollars in savings.
How to Get a Better Interest Rate
Besides shopping lenders, there are several other things first-time home buyers in Atlanta can do to get a lower rate, such as . . .
Going Through a First-time Buyer Mortgage Program
First-time home buyers can use any of a number of government and community mortgage programs to get lower interest rates (as well as other home-buying incentives).
Shortening the Closing Date into 15-Day Increments
First-time home buyers can also lower their rate by carefully selecting the closing date. Typically, lenders raise interest rates by 0.125% for every additional 15 days in a rate lock. So choose your closing date based on 15-day windows – that is, try to close in, say, 30 days rather than 31 or in 45 days instead of 46.
Buying Mortgage Discount Points
Paying for mortgage discount points is another way for first-time home buyers to lower their interest rate. These mortgage discount points are a one-time, upfront fee paid at closing that permanently lowers the buyer’s interest rate.
Getting Your Credit Score Up 20 Points
And certainly improving your credit score can get you a lower interest rate.Every 20-point increase in your credit score will improve your mortgage rate.
To significantly improve your credit score, do the following . . .
- Get all past-due bills paid up
- Reduce your credit card balances
- Pay down or off other existing debt
- Find and correct errors in your credit report
Increasing the Down Payment to the Next 5%
If you have conventional mortgage financing, you can lower your interest rate by increasing the down payment to the next 5% increment. When you have a good credit score, every additional 5% to the down payment can lower the interest rate by 0.125%.
Assistance for First-Time Home Buyers
Obviously, there’s a lot to understand about mortgage interest rates, but a little knowledge can save you a lot of money. And working closely with an experienced Atlanta can give you a leg up in the interest rate game. That’s why for most first-time buyers, the services of a good agent are indispensable. So if you’re among the first-time home buyers in Atlanta, be sure to contact us at (404) 977-5054.