There's been a lot of news lately about mortgage rates falling to historic lows. If you're new to the world of real estate finance, jumping on the "low rate" bandwagon has its perks, but it's important to know what it all means before you make any significant decisions. Let's get a bird's eye view of what mortgage interest rates are, what to keep in mind when researching rates and what exactly a low-interest rate means for your home loan process.
What is a Mortgage Interest Rate, Anyway?
Simply put, a mortgage interest rate is a percentage your lender charges you for borrowing money for a mortgage. A mortgage rate can either be fixed or adjustable. A fixed mortgage interest rate goes unchanged for the life of your loan. An adjustable rate can either increase or decrease over the life of your loan. Typically, loans come in 15, 20 or 30-year terms, where you pay the lender back for the money they've let you borrow, plus interest. The type of loan you get also has an impact on your mortgage interest rate. Some of the common types of loans are FHA, Conventional, VA and Jumbo loans (for more detail on mortgage terms, check out our mortgage terms glossary).
There are several factors that could affect the mortgage interest rate you qualify for, including:
- Credit Score
- Home Location & Price
- Loan Amount & Term
- Down Payment
- Type of Interest Rate (Fixed or Adjustable)
- Loan Type (FHA, Conventional, VA, etc.)
How to Research Rates
With a decision as big as borrowing hundreds of thousands of dollars for a home, it's crucial you do your homework. Researching mortgage interest rates will give you a ballpark of what you can expect to see when it comes time to get approved for a loan.
Getting the best interest rate is sometimes in the hands of the lender. When researching rates, we recommend shopping around to compare mortgage interest rates today. You might be surprised to find that digital lenders and credit unions typically have lower interest rates than banks. One of the many advantages of digital home lending is the below-market rates, saving borrowers even more at the virtual closing table.
What Does a Low-Interest Rate Mean For Your Home Loan Process?
With today's historically low interest rates, borrowers are finding it easier to secure home loans that were once out of reach. Lower rates allow borrowers to buy homes they may not have otherwise been able to afford. Since less of the monthly payment is going to interest, more can go to the actual cost of the home. Historically low-interest rates also allow current homeowners to save big when they refinance a home loan for an existing mortgage. Wondering if you can afford a home? Wyndham Capital's interest rate calculator gives you insight on "how much house" you can afford, accounting for all the costs associated home loans that are often overlooked in the early stages of the home buying process, like:
- Loan Principal & Interest Amounts
- Property Taxes
- HOA Dues/Fees (If Applicable)
- Down Payment Amount
- Loan Type & Term Options
No matter what season of homeownership you're in, these historically low mortgage interest rates are worth exploring. Interest rates this low are a gift worth taking advantage of, and with the right lender can be one of the best financial decisions you'll ever make. Talk to one of Wyndham Capital's home loan experts today to learn more about how our digital advantage works to your benefit in a time where mortgage interest rates have never been lower.
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