Are You A Home Buyer? This Is A Must Read On Mortgage Interest Rates for YOU!
George Soutu is a Connecticut Mortgage Lender you should listen to on what figures into your so called 'interest rate' when shopping for mortgage rates. I assure you that this will be one of the most important mortgage reads you do prior to home buying. A better informed home buyer pays less in mortgage interest!
No matter how low interest rates get one of the most asked questions I continue to get is What Is Your Interest Rate? My answer is always the same, it depends. Borrowers whose only concern is to get the lowest interest rate, believe the lowest interest rate is the best deal.
When a Borrower calls, and this is their first question, the conversation usually goes something like this. Sorry I can't just simply give you an Interest Rate. The law requires me to also give you the Annual Percentage Rate (APR) for the Interest Rates I quote as well. Also the APR can be different for the same Interest Rate based on whether the Interest Rate will have Points associated with it.
At this point the Borrower will ALWAYS tell me they do not want to be charged Points. My response is whether the Interest Rate will include Points or not, it will depend on their Credit Score, Loan-T-Value (LTV), type of property they are purchasing, and Loan Program.
When the caller hears my response one of two things generally happens. Either the conversation ends with the Borrower realizing I am not just going to give them an Interest Rate with out having a lot more information, or they realize the conversation does need to be more in debt in order for them to avoid a surprise later on.
When it comes to Interest Rates there are other factors a Borrower needs to consider which are just as, if not more important than the Interest Rate. One of those important factors a Borrower needs to consider is the Costs associated with that Interest Rate. One Lender my quote a 3.75% Interest Rate while another a 3.5% Interest Rate. Which one is the better deal? The answer is, it depends.
The 3.75% Interest Rate maybe a better deal than the 3.5% Interest Rate. The 3.75% Interest Rate may not have any Points associated with it, while the 3.5% Interest Rate may require the Borrower to pay 1 to 2 Points. The difference will be very apparent in the spread in the two APR's.
What will determine which Rate is a better deal, is the payback time for the Points associated with the 3.5% Interest Rate. The payback time can be quickly calculated by dividing the cost of the Points, by the monthly savings in the mortgage payment. This will provide the Borrower with the number of months it will take to recoup the cost of the Points. In my opinion if it takes more than 4 to 5 years (48 to 60 months) to recoup the cost of the Points, it is not worth it.
One other important factor is an Interest Rate may only be good for a moment in time. Interest Rates can change daily and even several times during the course of a day. The change in Interest Rates are determined by the 10 Year Bond. If the 10 Year Bond is doing well the Interest Rates may go down. If the 10 Year Bond is not doing well the Interest Rates may go up. The economic news throughout the day and week will determine how the stock market will react, which in turn impact the 10 Year Bond, and how quickly the interest rates will change. The only sure Interest Rate is the Interest Rate a Borrower locks with a Lender once they are in a position to do so.
As you can see the question "What Is Your Interest Rate?" may sound like an easy one, but it is not as simple as it sounds. What Is Your Interest Rate? It depends on other factors.
If someone just gives you a quick answer, be very careful. You maybe in for an unpleasant surprise later, and they may be breaking the law if they do not quote you an APR with the Interest Rate.
Info about the author:
George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or firstname.lastname@example.org