When you’re applying for a mortgage, you want to be sure you find the lowest interest rate possible. After all, you might end up saving tens of thousands of dollars in the long run by doing enough research and speaking to numerous lenders. However, many factors affect the interest rate, and this can be challenging to figure out even for veteran mortgage loan shoppers.
Knowing these factors will help you prepare yourself for the home buying process, as you’ll be aware of the required fees you’ll have to pay. It will also help you negotiate your loan much better. As little as a fraction of a percent on your interest rate is enough to save you thousands, so preparing and researching is definitely worth the effort. Here are the factors that you need to know:
Home Location
Your new home’s location, particularly your state, can also affect mortgage interest rates. Whether it’s in a rural or urban area also impacts the rate that mortgage lenders will offer you, so you’ll want to talk to multiple lending institutions and compare rates. You’ll also want to speak to local lenders, as they might offer you essential information that will help you find the right housing loan.
If you’re not sure how to estimate this rate, feel free to contact our experts at Mortgage City. We also have a mortgage payment calculator you can use to help determine your monthly payment. By calculating your projected monthly mortgage, you can have a firmer sense of the rates you can get.
Credit Scores
Your credit score is one of the most critical factors in determining your mortgage interest rate. Lenders need to be sure that they’ll get their money back, which is why they use your credit score to determine how reliable you’ll be in paying your mortgage loan. This reason explains why people with higher credit scores often receive lower interest rates, as they have a proven track record of paying their credit early or on time.
You can determine your credit score using the information in your credit report. This report shows your credit history, including your credit cards, all your loans, and your payment history. Reviewing your credit report is essential when you start the mortgage, as you’ll spot any errors that can affect your credit score and your chances of qualifying for better home loan terms and rates. Once you spot any, be sure to dispute them with the credit reporting company. Doing this will increase your credit score and help you get lower interest rates, saving you more money than you can imagine.
Home Price
Another factor that affects mortgage interest rates is your new home’s price. Your home price and the closing costs subtracted by your downpayment determine your mortgage loan amount. However, the lender might include your closing costs and mortgage insurance in your loan, depending on your loan type and situation.
If you’ve already begun to look around for homes, then you likely have a price range of your dream home. Otherwise, check out real estate websites. They have a lot of information about the neighborhoods you’re interested in, especially the usual prices of homes in the area.
Conclusion
Your home will likely be the most massive investment you’ll ever make in your life, which is why finding the lowest interest rate possible is essential. Now that you know the key factors that affect your mortgage interest rate, you can start preparing yourself accordingly and look for the best loan terms and rates available.
Our team at Mortgage City in Detroit, Michigan, has one goal—to fulfill your financing goals and make you a satisfied homeowner with the best mortgage loan possible. From the first point of contact to closing, we’ll handle your loan with the highest standards in the industry. Contact us today (248) 930-8709 to start your loan process!
