Who cares? Besides myself and some other loan originators, not too many people. Chances are, not even you!

While it is true that the mortgage rates for 30 years fixed rate loans in Indiana were below 4% (but trending up as I write this), a “low rate” does nothing for you, no matter whether it is a VA, USDA, FHA, or even a conventional mortgage. There is no real benefit. Think of it this way… would you buy a new pair of shoes because they had “springy” soles or would you buy them because they make you feel like you’re walking on clouds and takes away your foot pain?

“nuff said.

Allow me to get offtrack for a second. We in the mortgage business have done a poor job on educating our clients on what questions they should ask. While most everyone starts off with “what’s your rate?”, they really should be asking “how much do I need out of my pocket?” and “how much will this cost me each month?”. You see, a good rate in the wrong loan product, or a low principle and interest  with a high mortgage insurance premium is not always in your best interest.

OK… back to my rant.

Instead of saying that the rates here in Indiana are “near the lowest ever recorded”, how about a real tangible benefit? For someone purchasing a home, it could be to keep the monthly payments low, but it is usually so they can get a larger home with the same payment and a low rate. Note: I ALMOST NEVER recommend buying a larger home than you will need just because you can afford the payments. You are usually better off putting your excess funds into retirement and investments, but this is not the place or time for that discussion.

Remember though, waiting for prices to go down and ending up with a higher rate is not in your best interest (pardon the pun again). For proof, read this previous article I wrote.

For those that are looking to refinance, this is a great opportunity. This is what you should be looking for:

• Can I lower my payment each month? If the new payment, including closing costs, is lower than your old one, you can save cash that could be used to pay off credit cards, personal loans, auto loans, etc. Just make sure you are not refinancing to a 30 year loan when you have 12 years left to pay to save monthly. The savings could be easily eaten up by the interest paid.
• Can I lower my required payment, but still send in the same amount each month? In some cases, adding the extra savings on to the current payment can help you pay the loan off much quicker. While you may not see the savings in your pocket right now, you will when the loan is paid off with much less interest paid over it’s life.
• Can I pay the mortgage off sooner, even if the payment is higher? Refinancing from a 30 year to a 15 or 20 year mortgage at a lower rate will save a large amount (think 10′s of thousands of dollars possibly) over the life of the loan. Even if the payment is a little higher, the principle is being paid on an accelerated basis and much less interest will go to your lender.