Interest rates, interest rates, interest rates: it’s all anyone seems to be talking about! If you’re looking to buy a home, this subject is most likely top of mind. However, there are several factors that play into your home loan’s interest rate. Here are a few things to focus on:
Your Credit Score
Your credit score plays a big role in your interest rates. It gives lenders the assurance that the loan will be repaid. 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.” If you have questions about optimizing your credit score for the home buying process, please let me know!
Your Loan Type & Terms
There are several different loan types which offer various terms to best fit your buying situation. Conventional, VA, FHA and USDA loans are all popular types of loans. Each category of loan will have different requirements & terms that affect your interest rate, monthly payment, and the amount of interest that is paid over the duration of the loan.
Your Down Payment
The percent required for the down payment will depend on the type of loan that best fits your situation. If you currently own a home and are looking to move, you can use the equity you’ve built toward the downpayment for your next home! Overall, a larger down payment results in a lower interest rate, since lenders view this as a lower risk when you have an increased stake in your property.
Bottom Line
Mortgage rates vary! There are key factors that play a role in the interest rate you get. Contact me today for more information on how to get the lowest interest rate possible, tailored to your specific needs!
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