What loan or mortgage has the best rate right now? There isn't one "best rate" for every borrower, it really depends on each borrower's certain credit situation. "You know that is really a great question,"...
"You know that is really a great question," says Doug Perry about which mortgage has the best current rate. Perry has worked in the Consumer Markets Division for Countrywide Home Loans for 16 years. "It all goes back to the fact that there isn't one particular loan that is perfect for all customers. I frequently hear loan advertisements on the radio and read them in print, and they advertise the lowest rates out there."
"One of the lowest rates out there on adjustable rates is one and a quarter percent, but that might not be the best loan for everybody," Perry continues. "It just might not be the right loan for the uptake or the borrower."
"A borrower should not just evaluate a lender based on rate," Perry adds. "They really need to look at the service loans provided; the lender needs to properly analyze the borrower's situation, what the borrower wants to accomplish over the next three to ten years and provide the right individual situations. Because although these great low rates sound good, an adjustable rate mortgage for instance, just once per month might not be ideal for everybody."
Most people actually get a fixed rate 30-year loan. One reason is it is the easiest loan to qualify for. In addition, with a fixed rate term, the monthly payment will stay the same for the entire repayment term. A borrower will always know how much he will pay. A borrower might have the best chance with a fixed rate to keep low payments for the entire period of the loan.
On the other hand, people close to retirement age might accept the higher payments that would come with a 15-year fixed rate mortgage. That would allow them to be debt free by retirement.
An adjustable rate mortgage (ARM) has a rate that moves up or down as the current interest rate changes. With an ARM, a borrower will usually pay a much cheaper rate of interest in the beginning. At certain periods, often once or twice a year, the rate changes. There is a cap, or limit, on how much the interest rate can increase annually and over the term of the loan.
People who plan to move in a few years often choose an ARM. Such people might not be concerned about rate increases in the future. Other people, those who believe their income will steadily increase, might choose an ARM. On the other hand, rates have risen so dramatically in the past they were as high as 19%, so an ARM might not be the best choice for everybody.
Government programs offer special ARMs to help low-income families buy homes. The borrower can convert the loan to a fixed rate at a later date but will be charged a fee by the lender.
In fact, there are too many types of loans to list all of them and to give details as to loan rates of each. Just some of the types of home loans and the way the rates are calculated are: B, C, and D, loans for those with bad credit, which would require a higher rate, and probably a higher down payment; adjustable rate mortgages; negatively amortizing loan rates, which can limit how much monthly payments can increase; a two-step mortgage, which has a fixed rate for a number of years, often five to seven, followed by a change to the current market rate, and the new rate will remain the same for the remainder of the loan; fixed rate loans; and a variety off others.
In today's housing market so many types of interest rates and loans are available that the best thing for a prospective homebuyer to do is consult an expert, like the experts at Countrywide Home Loans.
