Four Things That Help Determine Your Mortgage Rate
If you’ve been thinking of buying a home, you most likely have thought about securing the lowest interest rate possible for your home loan. The last few year that was easier to do as the housing market saw record-low mortgage rates, but this year rates have risen dramatically.
If you’re looking at how to combat today’s higher rates and lock in the lowest you can, here are a few factors to think about. Since these opportunities can vary, please call us to connect for customized advice!
1 – Your Credit Score
Credit scores play a big role in your mortgage rate. Freddie Mac explains:
“When you build and maintain strong credit, mortgage lenders have greater confidence when qualifying you for a mortgage because they see that you’ve paid back your loans as agreed and used your credit wisely. Strong credit also means your lender is more apt to approve you for a mortgage that has more favorable terms and a lower interest rate.”
This is why it’s important to maintain your credit score–if you want to focus on improving your current score, we can give you expert advice to help you reach your goals.
2 – Your Loan Type
There are many types of loans, each offers different terms for a qualified buyer. The Consumer Financial Protection Bureau (CFPB) says:
“There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose.”
When working with your real estate advisor and mortgage professional, make sure you find out what’s available in your area and which types of loans you might qualify for.
3 – Your Loan Term
Another factor you should consider is the term of your loan. Just like with location and loan types, there are different options. Freddie Mac says:
“When choosing the right home loan for you, it’s important to consider the loan term, which is the length of time it will take you to repay your loan before you fully own your home. Your loan term will affect your interest rate, monthly payment, and the total amount of interest you will pay over the life of the loan.”
4 – Your Down Payment
If you currently own a home and are looking to sell, you can use the home equity you’ve built over time toward the down payment on your next home. The CFPB explains:
“In general, a larger down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So if you can comfortably put 20 percent or more down, do it–you’ll usually get a lower interest rate.”
These are just a few factors that help determine your mortgage rate when buying a home. The best thing you can do is have a team of professionals on your side! Call us today to connect and start a plan for each step of the process!