We’ve written extensively at Bankrate about how mortgage rates have tumbled to record lows in recent months. Now, some wholesalers are advertising mortgages with rates as low as 1.99 percent. These are mortgages made through mortgage brokers, not directly through lenders, and at first glance these seem like the lowest rates around.

If you’re thinking about buying a house or refinancing your current mortgage, now could certainly be a good time to do it. But, is it really reasonable to expect to pay interest below 2 percent?

It all depends.

Can I actually get a mortgage at 1.99 percent interest?

Loans like this are definitely available. To get one, you’ll have to apply through a broker because they’re only offered by mortgage wholesalers and aren’t available at your local bank.

“It’s very realistic, all they have to do is call,” said Alex Beadle, president of the Georgia Association of Mortgage Brokers and a mortgage broker at bigmortgagecompany.com in Stone Mountain, Georgia.

Beadle said he’s already written two loans with 1.99 percent interest and has about two dozen more clients in process who will likely qualify for that rate.

He added that these rates likely won’t last for long, so if locking in a super-low interest rate is your priority, now is the time to act.

“These rates weren’t here last year, and I doubt if they’ll be here again next year,” Beadle said. “If I can give any advice to consumers: take advantage of these rates while they’re here.”

So what’s the catch?

Glad you asked.

It’s true that these extraordinarily-low interest mortgages exist, but as with all good things in finance, it’s important to read the fine print.

Loans with a 1.99 percent interest rate have low monthly payments, but those may be offset by very high upfront costs. After all, the average rate for the 30-year fixed mortgage is 3.10 percent, according to Bankrate’s weekly national survey of lenders, and that’s a record low rate.

“The 1.99 or less is just not as attainable for most borrowers,” said Tracy Firth, a mortgage loan originator with Avenon Funding Inc. in Bakersfield, Calif. “I find it misleading, I would never advertise that.”

During an interview with Bankrate, Firth created a mock $250,000 mortgage proposal for a theoretical applicant with good credit. A 1.99 percent interest rate option appeared on her computer screen, but it came with 5.522 points, or an $11,000 fee as part of the closing costs.

“You really need to stay at 2.5 or over to stay at decent costs,” she said. “2.99 at 1.666 points is a lot more reasonable.”

OK, but can I get a 1.99 percent interest rate mortgage at a reasonable cost?

It’s not so cut-and-dried.

There are so many variables when it comes to mortgage rates, and the right product for one applicant won’t necessarily be right for someone else.

So 1.99 percent interest rate loans exist, but they aren’t the right fit for many people.

“1.99 or less, or even 2 percent, it’s not really that attainable, and it just sets people up for disappointment,” Firth said. “My philosophy is every file needs to be priced on its own merit.”

Beadle agreed, though he pointed out that around 70 percent of his current clients would qualify for a 1.99 percent mortgage interest rate.

“Each loan is different,” he said. “There are different types of loans that have different fees, there’s different types of loans that have different points,” and it’s important to work with your loan originator to figure out what’s best for your overall financial situation.

In the case of the 2.99 percent rate versus the 1.99, it’ll take about seven years to come out ahead. In other words, by then you’ll start to save money and break even on paying the $11,000 fee. After that, you’ll save about $130 a month.

How to work with a mortgage broker

It’s often a good idea to work with a mortgage broker, especially if you’re a first-time homebuyer.

Mortgage brokers can help you find the right lender for your housing situation, and will likely know the intricacies of what mortgage products are available to you. Working with a broker can help save you some research, and may save you money on your loan in the long run.

Your Realtor may be able to connect you with a mortgage broker, but you can also do your own research by talking to friends and family who recently purchased property, and by searching around online for brokers with good reviews in your area.

A mortgage broker gets paid either as part of your closing costs or by the lender after the loan closes. The fee is usually 1-2 percent of the total loan amount.

How to find the rate that’s best for you

  • Figure out what kind of mortgage is best for you. Shorter-term loans (like 15-year mortgages instead of the standard 30-year ones) tend to have lower rates.
  • Shop around among different lenders. Bankrate’s rate tables are a good place to start.
  • Know how your down payment affects your interest rate. If you can afford to put more money down, you’ll save in interest over the life of your loan.
  • Know what else affects your interest rate and what you can do to improve those factors. If you have a low credit score or a spotty employment history, you may want to focus on improving those things before buying a house. Having good credit and stable, long-term employment can help you get a lower interest rate.
  • Check out Bankrate’s mortgage calculator and other tools to help figure out your loan limits.

Bottom line

With mortgage interest rates at historic lows, now is a good time for many people to buy a house or refinance an existing loan. But, when considering a new mortgage, it’s important to look at a number of factors, including the interest rate, upfront costs and monthly payments. Sometimes, it may be more advantageous to secure a loan with a slightly higher interest rate in exchange for lower closing costs.

But, no matter what mortgage product you choose, you’re going to get a relatively good deal thanks to the current interest rate environment.

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