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Mortgage rates have surged. Here’s how to get a lower rate

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A real estate agent stands in the doorway as Giovani and Nicole Quiroz of Brooklyn, New York visit an open house in West Hempstead, New York.

Raychel Brightman | Newsday LLC | Newsday | Getty Images

After dropping to record lows in 2020 and 2021, mortgage rates are back up. Way up. While the past few weeks saw a reversal in the surge, at near 6%, current mortgage rates are still almost double what some homebuyers were paying in recent years. With soaring inflation and the possibility of further rate increases, would-be homebuyers may be looking for ways to lower their rates.

Here are five possible money-saving options.

1. Try to boost your credit score

Consumers may be able to improve their credit score in less than a month, said Daniel Rodriguez, chief operating officer at the wealth management firm Hill Wealth Strategies. Start by checking for discrepancies on your credit report that could make your debt situation appear worse than it actually is, he said. Also, if you have the cash, pay down your debts to reduce your debt-to-credit ratio. 

Once you’ve taken positive steps to improve your credit, consider asking your lender to initiate a process called a rapid rescore as a way to get positive changes to your credit updated quickly — typically within a week as opposed to 30 to 60 days. 

“Anything helps. Even if it’s only five points, it could make a big difference,” said John W. Mallett, president of MainStreet Mortgage, a mortgage broker in Westlake Village, California.

2. Comparison shop

Compare offerings among a variety of lenders and products. A local bank or credit union where you do significant business could offer more competitive rates than a large bank you’ve never worked with before. You could also try a mortgage broker to compare rates from several different lenders.

A mortgage bank, which specializes in home loan products, could be another option. Before reaching out it’s good to get a baseline idea of what’s available using online tools such as Bankrate.com or NerdWallet.

3. Consider paying points

Mortgage points are fees a borrower pays to a lender in exchange for a reduced interest rate. Each point equals 1% of the total loan amount.

Here’s a hypothetical example for a $200,000 loan taking into account principal and interest only. With zero points and an APR of 4.5%, the monthly payment would be $1,013.37, according to an example from Bank of America. With one point, the buyer would pay $2,000 for an APR of 4.25% and a monthly payment of $983.88. The total savings on a 30-year-loan would be $10,616.40, assuming the buyer owns the home for the full term and doesn’t refinance. With two points, the buyer would pay $4,000 for an APR of 4% and a monthly payment of $954.83. The total savings on that loan would be $21,074.40, again assuming the buyer owns the home for the full 30 years without refinancing.

More from Invest in You:
The big risks in buying a house sight unseen
5 steps you can take now to prepare your finances for a recession
Here’s how to adjust your housing budget amid rising mortgage rates

Be sure to crunch the numbers, taking into account factors such as how long you expect to own the home. With the 2-point option, for instance, you’d be saving $58.54 per month, compared with the no-point loan option. But because of the $4,000 upfront cost, it would take you 68 months to break even, according to Bank of America.

If you are going to keep the loan for the long-term, you could be better off paying points to get the lower rate, Mallett said.

4. Make a larger down payment

Instead of putting 20% down, consider putting down more additional cash upfront. This strategy will reduce a buyer’s loan-to-value ratio and potentially decrease lenders’ risks, said John Keratsis, president and chief executive of mortgage lender Deephaven Mortgage. “This may make borrowers more favorable candidates for a lower-rate loan.” 

How much lower depends on the lender and the product, but it could be somewhere up to 1%, said Josip Rupena, chief executive of Milo, a financial technology company that offers home loans.

Of course, there can be downsides to this strategy as well. You need to make sure you have the cash to do this, without depleting needed reserves.

5. Consider other loan types

One option is an adjustable-rate mortgage, or ARM.

As of July 11, the average APR for a 30-year fixed mortgage was 5.75%, according to a national survey by Bankrate. By contrast, Bankrate lists the marketplace average APR on a 5/1 ARM, meaning the rate stays the same for five years, as 5.53%. The average APR on a 7/1 ARM, where the introductory rate stays constant for seven years, is 4.98%, Bankrate said.

Another option could be an interest-only fixed-rate mortgage that is amortized over 30 years and allows the borrower to pay interest-only at the onset, say for 10 years. You’ll pay more over the life of the loan, but this could be an especially attractive option if you plan to keep the property for less than 10 years, Rupena said. 

When weighing the economics of these loan types, how long you plan to keep a property is an important consideration prospective buyers should weigh carefully, he said.

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.



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Ford CEO says 65% of U.S. dealers agree to sell EVs

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Ford F-150 Lightning trucks manufactured at the Rouge Electric Vehicle Center in Dearborn Michigan.

Courtesy: Ford Motor Co.

DETROIT – About 65% of Ford Motor’s dealers have agreed to sell electric vehicles as the company invests billions to expand production and sales of the battery-powered cars and trucks, CEO Jim Farley said Monday.

About 1,920 of Ford’s nearly 3,000 dealers in the U.S. agreed to sell EVs, according to Farley. He said roughly 80% of those dealers opted for the higher level of investment for EVs.

Ford offered its dealers the option to become “EV-certified” under one of two programs — with expected investments of $500,000 or $1.2 million. Dealers in the higher tier, which carries upfront costs of $900,000, receive “elite” certification and be allocated more EVs.

Ford, unlike crosstown rival General Motors, is allowing dealers to opt out of selling EVs and continue to sell the company’s cars. GM has offered buyouts to Buick and Cadillac dealers that don’t want to invest to sell EVs.

Dealers who decided not to invest in EVs may do so when Ford reopens the certification process in 2027.

“We think that the EV adoption in the U.S. will take time, so we wanted to give dealers a chance to come back,” Farley said during an Automotive News conference.

Ford’s plans to sell EVs have been a point of contention since the company split off its all-electric vehicle business earlier this year into a separate division known as Model e. Farley said the automaker and its dealers needed to lower costs, increase profits and deliver better, more consistent customer sales experiences.

Farley on Monday also reiterated that a direct-sales model is estimated to be thousands of dollars cheaper for the automaker than the auto industry’s traditional franchised system.

Wall Street analysts have largely viewed direct-to-consumer sales as a benefit to optimize profit. However, there have been growing pains for Tesla, which uses the sales model, when it comes to servicing its vehicles.

Ford’s current lineup of all-electric vehicles includes the Ford F-150 Lightning pickup, Mustang Mach-E crossover and e-Transit van. The automaker is expected to release a litany of other EVs globally under a plan to invest tens of billion of dollars in the technologies by 2026.



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Tim Draper predicts bitcoin will reach $250,000 despite FTX collapse

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Tim Draper, founder of Draper Associates, onstage at the Web Summit 2022 tech conference.

Ben McShane | Sportsfile via Getty Images

Venture capitalist Tim Draper thinks bitcoin will hit $250,000 a coin by the middle of 2023, even after a bruising year for the cryptocurrency marked by industry failures and sinking prices.

Draper previously predicted that bitcoin would top $250,000 by the end of 2022, but in early November, at the Web Summit tech conference in Lisbon, he said it would take until June 2023 for this to materialize.

He reaffirmed this position Saturday when asked how he felt about his price call following the collapse of FTX.

“I have extended my prediction by six months. $250k is still my number,” Draper told CNBC via email.

Bitcoin would need to rally nearly 1,400% from its current price of around $17,000 for Draper’s prediction to come true. The cryptocurrency has plunged over 60% since the start of the year.

Digital currencies are in the doldrums as tighter monetary policy from the Fed and a chain reaction of bankruptcies at major industry firms including Terra, Celsius and FTX have put intense pressure on prices.

FTX’s demise has also worsened an already severe liquidity crisis in the industry. Crypto exchange Gemini and lender Genesis are among the firms said to be impacted by the fallout from FTX’s insolvency.

Last week, veteran investor Mark Mobius told CNBC that bitcoin could crash to $10,000 next year, a more than 40% plunge from current prices. The co-founder of Mobius Capital Partners correctly called the drop to $20,000 this year.

Nevertheless, Draper is convinced that bitcoin, the world’s largest cryptocurrency, is set to rise in the new year.

“I expect a flight to quality and decentralized crypto like bitcoin, and for some of the weaker coins to become relics,” he told CNBC.

What is DeFi, and could it upend finance as we know it?

Draper, the founder of Draper Associates, is one of Silicon Valley’s best-known investors. He made successful bets on tech companies including Tesla, Skype and Baidu.

In 2014, Draper purchased 29,656 bitcoins confiscated by U.S. Marshals from the Silk Road dark web marketplace for $18.7 million. That year, he predicted the price of bitcoin would go to $10,000 in three years. Bitcoin went on to climb close to $20,000 in 2017.

Some of Draper’s other bets have soured, however. He invested in Theranos, a health startup that falsely claimed it was able to detect diseases with a few drops of blood. Elizabeth Holmes, Theranos’ founder, has been sentenced to 11 years in prison for fraud.

‘The dam is about to break’

Draper’s rationale for bitcoin’s breakout next year is that there remains a massive untapped demographic for bitcoin: women.

“My assumption is that, since women control 80% of retail spending and only 1 in 7 bitcoin wallets are currently held by women, the dam is about to break,” Draper said.

Crypto has long had a gender disparity problem. According to a survey conducted for CNBC and Acorns by Momentive, twice as many men as women invest in digital assets (16% of men vs. 7% of women).

“Retailers will save roughly 2% on every purchase made in bitcoin vs dollars,” Draper added. “Once retailers realize that that 2% can double their profits, bitcoin will be ubiquitous.”

Payment middlemen such as Visa and Mastercard currently charge fees as high as 2% each time credit cardholders use their card to pay for something. Bitcoin offers a way for people to bypass the middlemen.

However, using the digital coin for everyday spending is tough, since its price is very volatile and the coin is not widely accepted as currency.

“When people can buy their food, clothing and shelter all in bitcoin, they will have no use for centralized banking fiat dollars,” Draper said.

“Management of fiat is centralized and erratic. When a politician decides to spend $10 trillion, your dollars become worth about 82 cents. Then the Fed needs to raise rates to make up for the spend, and those arbitrary centralized decisions create an inconsistent economy,” he added. Fiat currencies derive their worth from their issuing government, unlike cryptocurrencies.

Meanwhile, the next so-called bitcoin halving — which cuts the bitcoin rewards to bitcoin miners — in 2024 will also boost the cryptocurrency, according to Draper, as it chokes the supply over time. The total number of bitcoins that will ever be mined is capped at 21 million.



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Three pharmaceutical stocks were top performers last week

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