When you are looking to get a mortgage, there are a variety of factors that will play a role in dictating what types of rates you are eligible to receive. Some of these factors will play a more significant role in determining your mortgage rates than others. Many of the factors that control how high your mortgage rate will be in your control which is essential when it comes to limiting how much interest you are paying versus how much of your money you are spending on your actual loan.
In this piece, we will take a look at the top 4 factors that affect your mortgage rate and how you can ensure that you get the lowest possible rates on the market when purchasing your new home:
Your Credit Scores: Your credit score is the single biggest factor that will influence your mortgage rate. The higher your credit score, the lower the mortgage rate you will have to pay to get out a loan that allows you to purchase a home. Your mortgage rate is affected because the institution that made you the loan is using your credit score to determine how much of a “risk” lending money to you is and how likely you are to make payments regularly and on time.
The Location of the Home You Are Buying: While this is not the most significant factor in your mortgage rates, different states can have slightly different mortgage rates available. If you are going to purchase a home in a more rural area, using an interest rate tool can help you determine if you are getting the best deal on your mortgage. Checking with multiple lenders can also ensure that you get the best mortgage rates in your area, which can save you $1000s over the life of your 15-to-30-year mortgage loan.
Home Price & Down Payment: The cost of the home will affect the mortgage rates that are available to you when you are financing your home. Very small or large loans may carry higher interest rates. Very expensive or inexpensive homes or those with a lower market value may also affect the interest rates have to pay to get a loan to purchase your home.
The Size of Your Down Payment: In many cases, if you can put a higher percentage of the home’s value down, you will get a lower interest rate. If you can’t afford to put at least 20% of the cost of the house down up front, you will have to purchase what is called private mortgage insurance (PMI) to ensure that the lender gets their money back, even if you default on your mortgage payments. This insurance lowers the risk a lender is taking providing you with a loan for a home.
These are the top 4 factors that will most heavily influence your mortgage rate when you purchase your next home. Remember, lower mortgage rates means you are paying less interest to the lender and putting more money down on the principal loan you got from the lender. In the end, the lower the mortgage rate, the more money you have in your pocket.
For further information and assistance in ensuring that you are getting the best (lowest) mortgage rate, you are eligible for in your area contact us via phone at 203-723-8500 so that the Branco Insurance Group can offer you further assistance. We will be happy to help.