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How to cope with higher mortgage rates

Mortgage » How To Cope With Higher Mortgage Rates

Play it safe
Play it safe

Despite the higher monthly payment, a 30-year fixed-rate loan still makes good sense for many home buyers and homeowners, according to Peter Thompson, a senior loan officer with Prospect Mortgage in Naperville, Ill.

"For a lot of people, the fixed-rate is the best way to go," he says. "If you look at the rates right now, they are still historically low."

The upside is peace of mind that neither the rate nor payment will ever increase. The downside is that borrowers who move or refinance within a few years will forgo the savings they would have realized on a shorter-term loan with an adjustable rate.

Borrowers who have a strong credit score or want to borrow, say, 80 percent or less of the home's value may be offered a more attractive rate than will borrowers who have a marginal credit history or need a higher loan-to-value ratio.

Shopping around for a loan and paying points are two ways to try to get a lower rate. (A point is an upfront fee equal to 1 percent of the loan amount.)

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