There’s a lot of thought that goes into not only getting a loan, but simply considering a loan as well. Your mortgage rate is bound to be one of your biggest considerations when deciding whether to accept the terms of a loan, which is why you should be aware of five things you probably didn’t know about mortgage rates.
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5 Things You Didn't Know About Mortgage Rates
1. Rates Fluctuate Every Day
The rates you get for your mortgage today might be different for the rates you get next week, even if nothing has changed about your application. To have more of a say in how much your rates are, you might want to opt for a home loan with locked interest rates rather than one with floating rates.
While the locked rates may not be the ideal that you can get, it’s better than taking a chance on getting rates that are even higher tomorrow or three days from now, even if it’s just by a small percentage.
2. You Can Reduce Your Initial Costs With an Adjustable Rate Mortgage
Usually, adjustable mortgage rates offer lower interest rates for the first five or seven years of the loan before resetting. One thing to bear in mind with this advantage is that loan rates are likely to take a sharp increase over that stretch of time, so be sure you account for that over the next five years. Because there are caps on how much your new interest rate can increase, you’ll want to find a mortgage that has lower caps. You should also know you have the option of refinancing your loan before it’s set to reset, which is recommended when rates are especially low or your financial situation has improved along with your credit score.
3. You Might Be Able to Get Better Rates With a Mortgage Consultant
You don’t have to go about securing great mortgage rates on your own. Instead, seek out the assistance of a mortgage consultant. There are plenty of online resources that can help you find the right mortgage for you, but nothing beats good ol’ industry experience and education. Mortgage consultants are better informed about lenders, are more knowledgeable about rates and can give you a better idea of how likely you are to be approved for a loan from a specific lender.
4. The Housing Market Impacts Rates
The overall state of the housing market also has a large part to play in your mortgage rates. For instance, if homes have flooded the market because of massive foreclosures and less housing is being constructed because there aren’t as many property builders, you’re likely to notice a drop in rates. Don’t just keep an eye out for the home you like, keep an eye on the housing market in general, which will determine the rates you’ll likely pay for the property you like.
5. You Matter as Well
In addition to the above scenarios, lenders will consider you as well when determining your mortgage rate. If you have poor credit and don’t have a history of making on-time payments, your mortgage rates are likely to be higher than someone with good credit and who pays bill early. You should also make every effort to put down as large of a down payment on your home as possible. Not only does doing so reduce the overall amount you have to borrow, it also lowers your loan rates.
Use these tips to find the perfect mortgage at the perfect time. While mortgage rates are just a small part of the mortgage process, they’re also one of the most essential. Have questions? Let us help you determine what step you should take next!