January 22, 2024
CBS News offers some advice to house hunters in 2024. Are you interested in buying a home with a lower interest rate? CBS has some advice for you, and as their published article reminds us, mortgage rates are falling in early 2024, but there are also ways to enhance your ability to get a lower rate.
The CBS report dispenses some advice to help homeowners take advantage of existing options that can earn qualifying borrowers an even lower rate.
But is the CBS advice sound? We examine their perspectives on getting a better rate on your home loan below.
Shopping Around For A Lender
CBS advice includes the idea that it’s best to shop around and find a lender offering the most competitive FHA loan rates and terms. Consider shopping as hard for a mortgage lender as you do an auto loan.
When reviewing the companies, keep in mind that their terms and conditions should be clearly stated, and you should get clear and direct answers to your questions. The most transparent lenders are best.
Applying For An Adjustable-Rate Mortgage (ARM)
CBS defines an ARM as a mortgage in which “…your rate will adjust over time. This could result in you getting a lower mortgage rate right now, but it may increase in time.”
It’s the kind of loan that has a lower introductory rate and features adjustments to it once that intro period expires.
CBS says of the ARM loan option, “It’s ideal for today’s market with high rates but optimism that rates will fall in the months and years to come.” And if home loan interest rates on FHA mortgages don’t fall enough in the future, CBS notes, “Buyers could always refinance into a fixed-rate mortgage at that point.:”
A Detail CBS Doesn’t Tell You About
The CBS report on this topic does NOT (at press time) mention an important fact about ARM loans. This option doesn’t serve borrowers well if they do not agree to a loan with an exit strategy. This is needed to avoid paying more in adjusted interest rates.
Simply put, borrowers who do not have an answer to the question, “What will you do about the adjusted rates?” are typically unready to commit to an FHA ARM loan. These loans demand additional long-term planning for best results.
CBS On Mortgage Discount Points
According to CBS, buying mortgage points helps an FHA borrower get a lower interest. This is possible via “a fee borrowers pay to the lenders — either rolled into the overall mortgage loan or paid at closing — to secure that locked-in, lower rate.”
CBS advice on discount points includes the notion that you should generally buy points IF the savings “outweigh the upfront costs of the points, or they may not be worth it.”
CBS adds that some borrowers may believe “rates could soon drop lower than what the points can offer,” and in such cases? “You may be better served waiting for the market to adjust.”
Something all borrowers should know before choosing this option? Buying discount points is not the best for those who don’t plan to keep the home long-term. Why?
A reduced interest rate typically pays off over the long term. That means selling in three to five years isn’t the right way to get the most out of your discount points. Buying them may or may not be worth the effort. Homeowners must do their own math to decide whether buying points is a good move for that transaction.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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