When applying for a home loan to purchase a home or refinance your home loan, the interest rate you receive will vary based on a number of factors. In this article, we will address some of the main factors that can ultimately affect what interest rate someone receives on a home loan.
Your Credit Profile
The first and most common consideration that will affect the interest rate you receive, is your credit score and down payment.
If you have a 760 credit score and are putting down a 20% down payment on the purchase of a home, you will most likely receive a better interest rate, then if you have a 620 credit score and put down a 5% down payment.
Of course, there are always options to choose a program that best fits your specific need, but your credit score, potential down payment on a purchase or the equity you have in your home when refinancing, will all affect your interest rate.
Your Closing Timeframe
Generally, the quicker you can close your home loan, the more advantageous the terms of your interest rate will be. Mortgage loans are generally locked in increments of 15, 30, 45 or 60 days, with longer locks available if needed as well.
If you are purchasing a home and have a very long escrow and want to lock your interest rate right away, you would actually receive a slightly worse interest rate if you had to lock a loan for 60 days, as opposed to say 30 days.
Your property type
The type of property you are financing, will also affect your interest rate. In general, if you are purchasing or refinancing a single family residence, that is your primary home, you will receive the best interest rate available for your situation.
If the property you are purchasing is a secondary home or an investment property, then the interest rates can be slightly higher.
In addition, if the property is a condominium, a manufactured home or a multiple unit property, then the interest rate you receive, can also be higher.
Your Loan Amount
The amount of your home loan can also affect the overall interest rate you receive. For instance, if you are obtaining a conventional loan within the conforming loan limit, then your interest rate might be different than on a jumbo home loan or an FHA home loan.
FHA home loans have lower loan limits then conventional loans, so that is also a consideration as well.
In addition, depending on your overall situation, rates can either be higher or lower on jumbo home loans, compared to conventional loans. So loan amounts can have a variety of effects on a potential interest rate.
As always, everyone’s situation is unique and to properly look into your specific situation, make sure and consult with a licensed local lender such as Strategic Mortgage to fully look over your complete situation.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com
Strategic Mortgage, LLC – AZBK#0909514 - NMLS#158804 - Equal Housing Lender
Vasilios Kamboukos – NMLS#160440
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