Four Things That Help Determine Your Mortgage Rate
Everyone wants the lowest rate possible when securing a mortgage. Rates were at historic lows but have doubled in the last year. What are the four things that determine your mortgage rate? Hi everyone, my name is Dennis Maynard. I’m a real estate broker in Los Angeles. Please don’t forget to like, subscribe, and follow.
Getting the lowest interest rate on a mortgage depends on four factors. Credit Scores play a big role in your mortgage rate. According to Freddie Mac, “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.” Maintaining a good credit score will save you money in the future.
Next is your Loan Type. There are many types of loans available to buyers based on varying qualifications. According to the Consumer Financial Protection Bureau, “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.” Working with a real estate agent and mortgage broker can help you determine what is available.
Another factor to consider is your Loan Term. From Freddie Mac, “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.” As a general rule of thumb, lower rates are offered for shorter terms.
Last, the size of your down payment will also offer better rates. If you are a homeowner looking to sell, the home equity you have built up over time will help you on your next down payment. “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.” CFPB
Having an experienced professional by your side will help you find the best rate possible. If you are thinking of buying or selling, and would like to explore your options, please give me a call.