How to get cheapest mortgage rates?

First of Xander; it is quite the opposite. The cheaper the home the higher, and in some cases harder, to get mortgaged. Banks want to make money, and they can’t if they mortgage a $ 40,000 home, and in order to mortgage it and make money they will need to charge large upfront fees and a pretty hefty interest rate.

Next, Minda, don’t over concern yourself with interest rate. First find yourself a program that best suites what you are trying to do with the house. If this is your first home, the likelihood that it will be your last is pretty slim. So think about doing an interest-only loan for 5 to 10 years fixed. This will greatly reduce your monthly mortgage payment and will remain constant for the term you choose.

I highly suggest against doing any type of loan that includes reverse mortgage. As delicious as those 1% introduction rates are, they are bad news, so stay away. Try to limit yourself to interest only, and no less, that way even though you are not paying down the principle, you are at least not going backwards.

Next, focus on the deal. For every $ 100 you get the price reduced, you will be saving yourself around $ 7. Doesn’t sound like much, but a simple reduction of $ 5000 saves you about $ 30 per month. And, if you shop for great houses in great areas that have been on the market for a long time (90+ days), I bet you can find an even better deal.

Bottom line, there are many factors into creating a great deal. Many more than just the mortgage rate. Look at the whole deal, and ask yourself if you think you are getting a great deal. If you don’t think you are, then you probably aren’t. Almost everything in real estate is negotiable, don’t forget that.

Happy Hunting

I will just add something here to rebut Mark G’s response to my suggestion of the interest-only loan. Having a 15 or 30 year fixed conventional loan does not mean that you will own the property any faster. Let me say this, if having an interest-only loan affords you the opportunity to buy a better home, isn’t that the house you want to own? Its appreciation will probably go up faster than one that is not as big or as well located. And, if this is not going to be you final home, why give more money to the bank, in the form of mortgage payments, than you need to. If, for about the first 10 years you are paying between 80%-90% interest anyhow, what does it matter if you pay a couple of bucks to the principle. Would you rather not save that money instead, in case of rainy day? If you’ve owned homes as I have, it never fails. Something comes up and you need money for it. Is your bank going to give you back the money you gave it, so freely? Heck no, they will charge you to take the money out, and then they will charge you a higher interest on it as well. So why give them more than you need to. Next, if you saved a couple of hundred bucks every month, you could put that money away in a savings, and with enough discipline, you could buy a second, third, forth, fifth home as an investment, or invest into some stocks or any other thing that will give you a return greater than your 6 or 7 percent, and there are plenty to choose from.

Now I want to set the record straight. I am not promoting or suggesting you get an interest-only loan, I am suggesting you don’t get anything worse than an interest-only loan.

I’ve owned many homes, and still own many homes, I’ve owned home free and clear, and I’ve mortgaged myself 100%. Every mortgage fit the situation I was attempting to achieve. However, there is a realization that you must confront; if you live in the US, you will never fully own your home. You will still have to pay taxes, and if you are smart, you will still have to pay insurance. The myth of owning your home is from the good old day, when our grandparents used to pay large sums of cash to buy their home. That doesn’t exist any more. Even the wealthiest of the wealthiest, keep leveraging themselves over and over again to keep getting richer. There are no real advantages to owning your home fully outright. Why tie up $ 200,000 in owning your home, and when you need that money, you have to pay to get it out. It ludicrous.

Lastly in regard to preparing for the next one (home, I’m assuming), how many years will it take to make a dent into the principle of that loan, before you’ve made enough to make a decent profit. Even though you are not paying down the principle with your interest-only loan, the appreciation is going to take care of the equity in your home. Buying a better house, a bigger house will appreciate just as fast if not faster than the other house, except the percentage translates into bigger cash in the homeowner’s pocket. And, with the markets as soft as they are right now, why not try to buy as many houses as you can respectfully. If the appreciation is going to be there in 3-5 years, when you are ready to refinance; with all the money you could have saved and reinvested, you could own 5 or even more homes. Refinance a few, maybe sell a few, do whatever you want, but the result will still be astronomical than if you had spent every dollar on that one smaller, cheaper home, just because you finance incorrectly.

I do agree with one thing you said, buy within your means. But the advantage of an interest-only loan is that you don’t have to put a bunch of money down, and for the same reasons as I stated above, it’s ridiculous. The potential homeowner needs to remember that once the property is bought, they are fully responsible for the upkeep and the payments of the mortgage. If a full PITI payment is $ 1500 per month and an interest-only payment is $ 1000, and assume something happens where they need some money, would you lend it to them if they called you with their problem and you has sold them that house? If they lost their job, how easy do you think it would be to refinance, without any job verification, even going stated. Yeah, it would still be difficult to come up with the mortgage payment, but last time I checked, getting $ 1000 is easier than $ 1500. But I guess you could rest assured, after all owning that home is what matters, it’s not like the bank is going to want their money or anything like that. Oh wait, yeah they will, and how will that pride of ownership feel when a auction is taking place at your front door and people are bidding to buy your house and put you out on the street. Think about that.

Happy Hunting