Interest rates for home mortgages are often times a bit more complex than meets the eye. Not only do they move on a daily basis, but the interest rate you receive on a particular home loan can vary greatly, depending on host factors.
In this article, we will discuss some of the most factors that do determine what interest rate you will receive on a home loan.
Your credit score will play a major role in determining your interest rate. In general, someone with a 620 credit score will receive a worse interest rate than someone with a 760 credit score.
And someone with a 580 credit score might be able to obtain an FHA loan, but not a Conventional loan.
Credit is key and often times the biggest factor in determining your interest rate.
Your Down Payment or Equity
If you are purchasing a home, the amount of your down payment will also affect your interest rate. The lower your down payment, the generally higher your interest rate will be.
The same goes on a refinance, with equity in a home being a factor in the interest rate received.
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. Therefore, loan amounts can have a variety of effects on a potential interest rate.
Finally, yet another factor and perhaps the most obvious to consumers, is that the lender you choose will have an impact on the interest rate you receive. Even though most lenders offer a similar variety of home loan programs, the interest rates lenders offer can vary widely from one company to the next. For this reason, it’s always important to do your due diligence to ensure you are receiving a fair market interest rate and look for a referral to a trusted professional work with.
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: firstname.lastname@example.org or online at www.strategicmtgaz.com
Vasilios Kamboukos – NMLS#160440