Mortgage Rates are Still Low and It's a Good Time to Purchase a Home

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    Sep 26, 2013
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Mortgage Rates are Still Low and It Photo by Sunrise Loan

Although mortgage rates have fluctuated a bit in 2013, there haven't been any major ups or downs in finance rates. With 30-year fixed loans at 4.5 percent, FHA and VA loans at 4.15 percent, 15-year fixed loans at 3.62 percent and five-year ARMS ranging from 3.0 to 3.50 percent depending on the lender, it's still a good time to purchase a home. However, these finance rates are just a snapshot and will likely change.

Often, future homebuyers wonder who controls the interest rates for mortgages. It's the Federal Reserve that monitors and sets standards for the mortgage rates in the United States. This organization is an independent one and does need government approval before setting standards. Presently, Ben Bernake is the president of this organization. Every month, members of the Federal Reserve meet to determine the liquidity of funds in the country and establish finance rates that will keep the economy balanced. Typically, if the circulation of money is abundant, prices will increase. On the flip side, prices will decrease if the circulation of money is low. Inflation is another factor that can drive mortgage interest rates higher. When the currency loses purchasing power, banks must make up for what the currency will be worth when the full amount of finance interest is paid.

Fixed rate mortgages are based on the national average, but do vary from state to state. These mortgages maintain the same finance rate throughout the full period of the loan. Those homebuyers who plan to remain in the home for the duration of the loan do well with this type of mortage. If interest rates rise, the rate with this type of mortgage is fixed and does not increase. In addition, consumers can refinance for a lower finance rate if interest rates decrease. Generally, these loans are available as 30-year and 15-year options. The longer the term, the higher the higher the mortgage rate.

ARMs are adjustable rates mortgages that are typically lower than fixed mortgages when the loan is created. These loans may adjust on a monthly basis, and consumers need to be aware that as interest rates increase, so will the monthly payment. ARMs can be beneficial to consumers and investors who plan to keep the loan for only a short period. Other than that, ARMs are a risk.

FHA loans are available to those homebuyers who cannot afford high interest rates or a large down payment. Often, they are given to consumers who have low to middle income. The finance rates for FHA are lower than the national average for fixed rate loan. Homebuyers need to do the right research for FHA loans, as it's the individual bank that determines the finance rate. Consumers can receive an FHA loan with as little as 3 percent down along with up to 6 percent of the closing costs. Basically, homebuyers can borrow up to 97 percent of the purchase price of a house.

VA loans are available only those who have served in the military. The United States Department of Veteran Affairs is the mandating organization that sets the rules for the recipients of these types of loans. This body also insures VA loans and determines the terms of the loan. Veterans can obtain 100 percent financing for the purchase of a home.


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