With interest rates at their highest levels in about 20 years, getting the lowest possible interest rate is important! There are a few ways you can help to lower your rate – or at least get the lowest possible these days.
-Your credit score plays a huge role in your interest rate. When you have a high credit score and stong credit history, mortgage lenders have greater confidence that you will pay back your mortgage. You have shown that you have a history of paying back your loans as agreed and using credit wisely. This can help to get you lower interest rates.
-Your loan type can also affect your interest rate. There are several types of loans, FHA, conventional, VA and USDA loans. Rates can vary based on the type of loan you choose. Also remember that FHA loans require mortgage insurance for the life of the loan if you just put 3.5% down. VA and USDA loans also require the VA funding fee or USDA annual fee paid over the life of the loan. So that can increase your payment even if the rate is lower.
-Your loan term can also affect your interest rate. If you have a 15 year loan, the interest rate will be lower than a 30 year rate. However because you are paying it off sooner, the payment will be higher. It may not be the best plan for your situation – but it is something to look at.
-Your down payment can also affect your interest rate. If you have a larger down payment, it can lower your rate. The more you can put down, the better! Usually there is a difference between 20 and 25% down on a home – the more down, the lower the rate.
These are just a few factors that can help you determine your mortgage rate when you are buying a home. Truly the most important is your credit score and down payment. Mortgage interest rates are definitely higher than they were a few months ago. We have seen rates higher than this but it’s been several years. Those that owned homes in the 1980’s will talk about interest rates in the high teens (like 18%)!! However, home prices were lower – but so was income. The reality is it can be easier to buy a home now than it was last year – even this past spring. The market is slowly changing to a more normal market. If you buy a home now, there is a better chance that you will not have to offer a crazy over list price. This means that if you buy a home today at list price with a higher rate, your monthly payment could be lower than if you had to pay more for the home!
All this means is it’s still a good time to buy! As I have heard more than once lately, “you marry the house, you date the rate”! Meaning that you can buy now and you can also refinance the home down the road when rates drop! We know they will drop at some time!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
