Purchasing your first home does not need to remain a dream any longer, because interest rates are incredibly low, allowing people to qualify for a home as opposed to paying rent. Home interest rates are the the single most expensive costs of your home. It is the largest expense that you incur, on top of the purchase price of your home. What are other contributing factors to the interest rate? Although there are many factors that affect home interest rates, you can easily understand them and have a great shot at reducing the overall cost of your home.
The first thing that affects the mortgage rate is the market. As with any investment vehicle, the rate of return is in proportion to the risk undertaken. Since of the main sources for funds backing mortgages are mortgage bonds, as the bond market fluctuates, so do home interest rates.
Secondly, the mortgage rate may change from one type of loan to the next as well. For example, the longer the loan terms are, the higher the interest rate will be on them. This is due to the fact that with each payment, less principal is being applied and the lender’s risk is extended for a longer period. Again, higher risk means higher rate of return for the lender, higher mortgage rate for you.
If you have a low credit score, often there will be an increased interest on your mortgage. You should be aware of what your credit score is and you can find this out by obtaining your credit report. To increase or to maintain a high credit score, be sure to pay all loans and lines of credit on time, keep your credit card balances as low as possible and try to minimize your credit inquiries. The higher your score is, the less risk to the lender and therefore results in a lower interest rate for you.
In order to know what the rates of a home loan that you qualify for are, simply go to the lenders websites and request a free loan quote. This will give you a good understanding of where you stand as well as provide you with a way to compare one lender to the next. Because the difference in just a few fractions of a percentage point are so very important (it can cost you thousands of dollars), it makes sense that you will need to carefully look for the lender that can offer you the most ideal interest for your situation. Many online lenders today, will offer a free mortgage quote without the need of inputting your social security number, which makes the process painless for the mortgage shopper.
Finally, you should know the mortgage rate on any loan long before you head to escrow and sign your loan documents.