Wondering how mortgage rates work and how you can get the best rate possible? This is one of the most common questions that we answer as mortgage loan consultants! It’s a smart question because your mortgage rate can have a big impact on your finances over time. If you’re paying too much, it will definitely add up. So let’s jump in to the factors that determine the mortgage rates you can get!
The 6 Main Factors Influencing Your Mortgage Rate
1. The Economy
All mortgage rates have a baseline that’s determined by the market. No one can control this factor, and it can cause mortgage rates to fluctuate quite a bit from one week to the next depending on how the economy is doing.
2. The Type of Mortgage You Want
As you shop for loans, you may notice that the available rates vary from one type of mortgage to the next. It’s important to note that fixed mortgages will lock in the same interest rate and monthly payment for the life of the loan, but adjustable-rate mortgages will change annually according to the market once the fixed-rate period is over.
3. Your Finances
As you may already know, your credit score has a big impact on your mortgage rates. If you have a good credit score, lenders can trust you with a better rate. A poor credit score can indicate more risk for the lender, which is why they will charge higher rates if your credit score is low.
4. Your Use of Points and Credits
Some homebuyers decide to use “points” (essentially, prepaid interest) in order to buy a lower rate. While this costs more upfront, it can save you in the long run as long as you don’t sell or refinance too quickly. You can also take “credits” to lower your closing cost in exchange for a higher rate, if you need to spend less upfront. Talk to your lender if this is something you’re interested in.
5. The Property You’re Purchasing
Are you buying a single-family home, a condo, or an apartment? Is it your primary home, a second home or an investment property? The answers to these questions will also affect your mortgage rate.
6. How Much Money You’re Putting Down on the Property
Are you going with the traditional 20% down payment, or is it lower or higher? Different down payment percentages can have different impacts on your rates. Your loan consultant can help you determine how your down payment will affect your unique situation.
Do you need a lender you can trust – someone who will give you the best rates possible for your situation? Look no further than Loan Cabin!