${Html.ActionLink("My MarketWatch", "index", new { controller = "composite", area = "section", page = "my" })} | !{Html.ActionLink("Sign out", "LogOff", new { area = "User", controller = "Account" }, new { id = "signOutLink" })}
Welcome, ${UserDisplayName}
Sign in
Become a MarketWatch member today
Amy Hoak's Home Economics Archives | Email alerts
Oct. 31, 2011, 12:01 a.m. EDT
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) "” Mortgage rates are near historical lows, but the rates lenders are quoting you aren't as eye-popping as those you see in the news.
Buying a retirement or second home might sound like a great idea, until friends and family begin using your place as a crash pad. Here are tips on how to handle unexpected guests without damaging relationships.
Why is that?
First, remember that mortgage rates are moving constantly, and rate surveys are capturing rates from past points in time. For example, Freddie Mac's weekly survey collects rate data over the course of a week. Bankrate.com's survey collects rate data every Wednesday.
By the time results are released, they're already outdated.
There are other reasons your rate might be higher. Below are five of them.
Average rates in Freddie Mac's survey include average discount points paid for the mortgage. But not everyone is willing to pay points.
For the week ending Oct. 27, rates on the 30-year fixed-rate mortgage averaged 4.1%, but that rate required an average 0.8 point to get it. A point is 1% of the mortgage amount, charged as prepaid interest. Read more: Rates on 30-year mortgage slide to 4.1%.
Unless you're going to live in your home for a very long time, paying points often doesn't make sense, said Greg McBride, senior financial analyst for Bankrate.com.
"Where the investment pays off is if this is a loan you're going to have for a long period of time. You're making an investment of money now to pay the points to get the benefit of a lower monthly payment for years to come," he said. "The more years you have of that lower monthly payment, the greater return on that initial investment of points."
Bankrate's weekly survey includes as many zero-point loans as possible, McBride said. That's another reason that rates in Bankrate's survey are different than those in Freddie Mac's, he said. The 30-year fixed-rate mortgage averaged 4.33%, but points required to get that mortgage averaged 0.42, according to the Bankrate survey released Oct. 27.
A credit score on the low side will prevent you from getting the lowest rates. Low levels of home equity will also mean a pricier mortgage rate.
That's thanks to loan level price adjustments from Fannie Mae and Freddie Mac that have been making it tougher for borrowers to get the best rates for the past few years.
"The further down the FICO realm you go, and the higher the loan-to-value ratio, the more cost for the consumer," said Cameron Findlay, chief economist for LendingTree.com, an online network of lenders.
Why you can't get the lowest mortgage rates
S&P 500, Nasdaq score monthly gains of 11%
MF Global from bad to worse
MF Global files for bankruptcy protection
Stock futures sink as markets eye Europe
MF Global from bad to worse
The galaxy may be safe, but what about the euro?
"Puss in Boots' crushes DreamWorks
China advocates Europe borrow in renminbi
What Would Occupy Boston Ask Bernanke
Winemaker Grows Name in Hidden Corner of Napa
Health-Care Costs in Retirement
Planning for Financial Risks in Retirement
Amy Hoak covers real estate and personal finance for MarketWatch, and writes the Home Economics column. She also writes MarketWatch's Real Estate Weekly... Expand
Amy Hoak covers real estate and personal finance for MarketWatch, and writes the Home Economics column. She also writes MarketWatch's Real Estate Weekly newsletter and is a contributor to The Wall Street Journal Sunday. She has won awards for her work from the National Association of Real Estate Editors and the Society of American Business Editors and Writers. Collapse
Marsh on Monday
Europe could have to borrow in renminbi
Home Economics
Why you can't get the lowest mortgage rates
This Week in China
Halloween comes early for Chinese real estate
On Retirement
Money smarts erode quickly after age 60
Behavioral Economics
An apocalyptic end to world's biggest bubble
Read Full Article »