What Factors Determine Your Mortgage Interest Rate?

Are you looking for a home, or thinking about jumping into the home-buying pool? If so, you probably want to secure the lowest interest rate possible for your home loan, and that may seem confusing! Especially with the dramatic rise in interest rates that has followed record-low rates. To get the best rate possible, focus on a few key items, and check with several trusted lenders (we can supply a list of some we often work with) because different banks have different programs.

Credit Score

Credit scores can play a big role in your mortgage rate.  Why? Because lenders have more confidence in qualifying buyers if they can see that you've paid back previous loans as terms indicated, and that you've wisely used your credit.  You'll be looked upon morre favorably if your credit history is strong.  If your credit could use some boosting, get advice from your lender, who is sure to have some tips for increasing your credit worthiness both in the near term and long term.

Loan Type

There are many types of loans, each offering different terms for qualified buyers. The most well known are conventional, FHA and VA loans, but there are also other types that aren't as common.  Interest rates can be very different depending on the type of loan.  Plus, there are many first time homebuyer and other programs available that are specific to certain cities and towns. Don't miss out on any options!  A knowledgeable lender can explain the various loan programs and their requirements.

Loan Term

Another factor to consider is the term of your loan. Just like with location and loan types, you have options.  These options will change not only the length of your loan term, but also your monthly payment - and the total amount you will pay over the life of the loan. 

Down Payment

If you’re a current homeowner looking to sell and make a move, you can use thehome equity you've got in your home toward the down payment on your next home. Building equity is a major reason to own a home in the first place!  A larger down payment generally means you'll qualify for a lower interest rate.  The more money you put down on a house, the less risk the bank is taking since it is lending you less.

There's a lot to take into consideration when you're applying for a mortgage, so be sure to speak with a seasoned lender - and one of our experienced agents!

Bottom Line

These are just few factors that can help determine your mortgage rate if you’re buying a home. The best thing you can do is have a team of professionals on your side. Connect with a local real estate professional and a trusted lender so you have the expert advice you need in each step of the process.