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Low interest rates: Purchase or refinance?

Interest rates around the Chicago area have fallen to record low levels as of late, and many are deciding whether to purchase a new home or refinance their current residence.

Rates for 30-year mortgages with no points are as low as 4.875%, which is phenomenal compared to where they have been in the past. It has been said that any rate below 7% is fantastic. However with the slow housing market rates have fallen below the 5% mark with most local lenders.

Many are choosing to refinance, but with the enticing homebuyers tax credit, which was expanded and extended, purchasing may be an option to those who have toyed with the idea of upgrading or even downsizing their residence.

The key to finding a lender that you trust starts with using someone in your neighborhood, either as a recommendation from another business partner or Realtor, or from a past experience. Reputable companies that build business on referrals and have a strong presence in the community are two other important factors.

Some customers find dirt-cheap rates on-line, but many times these are not local companies and you are often dealing with someone on the other end of the country, and access and communication is far from desirable. These on-line bargains may also feature hidden fees and closing costs in the fine print as well.

When deciding whether to purchase or refinance, try to come up with a short-term and long-term plan for what's best for you and your family.