A Few Points About Interest Rates

A Few Points About Interest Rates

Less is more

If you're new to investing or real estate and don't know the first thing about interest rates, here's a good tip: the higher the interest rate, the more expensive it's going to be. High interest rates mean you will have to pay back more on the money you borrow. Another good rule of thumb is that affordability increases if you use an adjustable rate mortgage (it's easier to qualify this way). Of course, there will be a wide range of prices that you can choose from, depending on what kind of financing you choose.

Not even the Fed knows for sure

The Fed holds a considerable amount of power, but they can't control everything. Mortgage interest rates are affected by many unpredictable political, economic and social events. So there is no guarantee what direction interest rates will go, despite the forecasts of the experts. Therefore, make your financial decision based on where things are today including your budget, your needs and your future plans.

Locking in rates assures your lowest interest

If you do decide you want to lock in at a certain interest rate, you will need to complete a loan application and send it to your lender as soon as possible. This must be done so that your commitment doesn't run out before your loan is approved. Follow up and be se sure that the lender is receiving all of the necessary documentation. Get a property appraisal, which usually costs about $300, through your loan agent as soon as possible.

Don't obsess and miss a good real estate deal

Although rising interest rates can create more problems for home buyers, waiting and hoping for low rates is not necessarily a smart move. You may end up paying a higher price. Also, refinancing is always an option in the event that interest rates come down.

(c) Copyright 2005 Madan Ahluwalia. All rights reserved.

About the Author

Madan “Raja” Ahluwalia is an Attorney at Law & Realtor. Raja offers his clients a counseling-based approach to home buying, where the client’s long-term goals are the most important consideration. He possesses a thorough understanding of the market and trends, based on years of involvement in real estate. He provides expert insights and helps clients understand timing, pricing and financing issues. Contact Raja at raja@kw.com or 650.430.4023.


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