Mortgage rates have risen to their highest point in 35 years, making purchasing a home more costly and potentially harder for many buyers, including Black Americans.
According to housing finance giant Freddie Mac, the average rate for a 30-year fixed-rate mortgage rose to 5.78% on June 16, 2022.
“Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987,” Freddie Mac’s Chief Economist Sam Khater stated.
The jump came as the Federal Reserve boosted interest rates by 0.75% on June 15, the largest hike by the nation’s central bank since 1994.
Even with home loan rates rising, people should be mindful that they are still much lower than in the early 1980s when they were around or above 18%. That is over three times the fixed rate now. Still, with rates likely to keep soaring, now might be ideal to consider options to help offset those costs.
Here are some ways to save money and subdue climbing mortgage interest rates:
Look into an adjustable-rate mortgage
This is a choice some borrowers consider when mortgages go up. The reason being the rate is lower than a fixed-rate loan. The 15-year fixed-rate mortgage at Freddie Mac was 4.81%, almost a full percentage point less than the fixed rate. Some ARMs can last from three to 10 years. Observers say they could be advantageous if you plan to live in a home for a short time. But, be aware that ARMs can bring risks if carried over a long time. So, be sure to ask your lender what steps you should take to protect yourself.
Lock in your rate for a clear-cut time period
With mortgage rates rising frequently, you may do well to lock in the rate once you’re under contract to buy a home and before the closing. This could help you avoid paying a higher rate or potentially putting more money down. Generally, rate locks are good for 30 days but can run 45 to 60 days, depending on the lender. Be sure to ask your lender what the exact lock-in period is to help avoid any surprises.
Upgrade your credit
Before committing to a mortgage, do your research to help boost your credit score. This can help ensure you qualify for a loan. Ask for free credit report copies from Equifax, Experian, and TransUnion. By reducing potential risks to the lender, you will gain more leverage to possibly get a better rate. Examine your report to make sure it doesn’t contain misinformation. And look for ways to raise your FICO mortgage score.
Make a larger down payment.
If you can make a larger down payment, it can potentially lessen your monthly payment. If you put down a minimum of 20%, you can increase your chances of getting the best rate and help avoid private mortgage insurance. But if you can’t do that, putting down more can still help you get a lower interest rate.
Shop around to land a better deal
With mortgage rates steadily rising, people have pulled back on buying or refinancing. This retreat could result in lenders being more aggressive to win your business. Get quotes from at least three to four lenders, including online lenders, credit unions, and banks. Don’t be afraid to negotiate for a lower interest rate and lower closing costs.
“The single best thing you can do is establish a good relationship with your loan officer at your neighborhood bank. Your local lender understands how important it is to look beyond traditional credit scores and will go the extra mile to help you get a better rate and meet the requirements for a better loan,” says Michael Pugh, president and chief executive officer of Carver Federal Savings Bank.
“At Carver, we understand how important access to capital is and rely on strong, personal relationships with our clients and community to achieve success.”