If you’re looking to purchase a home, most will be looking to secure a mortgage to do so. With today’s rising interest rates, you want to make sure that you secure the lowest rate possible. Over the last couple of years, that was an easy task due to the record low interest rates we had enjoyed and seen like no other … but unfortunately, not so much the case right now.
Below are a just a few factors to consider that can and will determine your interest rate. Something you should be mindful of …
There are many things a lender will look at to complete your mortgage application to get you pre-approved and ultimately approved for a mortgage, and your credit score will play a BIG factor in that.
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.”
That is why it is so important to maintain a good credit score. If you find you need to improve your score, speak to a trusted mortgage advisor to give you the expert advice and guidance you need to succeed.
There are many types of loans, each one offering different terms for qualified buyers. 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.”
Another factor to consider is the term of your loan. Just like with location and loan types, you have 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.”
Depending on your situation, the length of your loan can also change your mortgage rate.
If you’re a current homeowner looking to sell and make a move, 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.”
Before you start your home search, and before you commit to a lender, do a little of your own homework to see what each lender may have to offer, based upon your own personal needs. Interest rates can vary lender to lender, but generally speaking … interest rates in and of itself should not vary all that much. It’s more about the individuals’ variables some of which I outlined above, that will determine the interest rate, one person to another.
To get yourself moving on the right path … speak with a trusted real estate advisor and a trusted mortgage lender to give you the expert advice and guidance you need to get you on the best path towards home ownership.
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