Home Loan Interest Rate Facts
What do you need to remember in a time when the housing market is trying to improve but is hitting some rocky territory along the way? We cover some of the major issues below.
Interest Rates Are Lower for Lower-Risk Mortgages
That means if you come to the lender with higher FICO scores, or if you come to the lender with the ability to afford a 15-year loan instead of a 30-year note, or both, you may be offered a more competitive interest rate.
Bottom line? If your lender takes more risk with your loan, your rate will be higher.
Interest Rates May Be Lowered for the Right Down Payment
Is your participating FHA lender willing to offer you a better interest rate in exchange for a higher down payment? It’s worth asking. Never assume the lender won’t try to work with you in this area. There are several options you can pursue.
Interest Rates Change Daily
This is one of the issues new borrowers learn first. Today’s low or high rates are not necessarily tomorrow’s rates. There are several variables that affect how high or low a rate may be adjusted daily. This is Home Loans 101 advice. What’s the next-level thing to know about rates?
Interest Rates Advertised Are Not Necessarily Those Offered
Not in a bait-and-switch way. Not in an illegal or scammy way. The interest rates displayed on lender sites are “ideal” for a well-qualified borrower. Your experience will vary. Your FICO scores and other financials help the lender determine how much of a credit risk you are, and that risk informs your rate.
You may also find that rates vary depending on whether you apply for an adjustable-rate mortgage instead of a fixed-rate loan.
Interest Rates Can Be Bought Down
Note that we say “bought” down and not “brought” down. You can pay the lender a fee to get a lower mortgage rate. This is called buying discount points, and that option is ideal for those who plan to keep the home for a long time.
Shop Around
Yes, it’s Home Loans 101 advice, but it’s also some of the BEST advice if you want a more competitive interest rate. Compare 3 to 5 lenders to see who offers you the best rates and under which terms.
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