You want to know you’re getting the best interest rate when you buy a home right?
Going online to search interest rates is very confusing.
You see all kinds of numbers and quotes and you get different rates everytime you go to a different site.
Some of the information can even feel misleading… and sometimes it is.
I get asked all the time…”What is the rate today”?
Great question but there is a lot more information we need to consider before giving an accurate answer to what your rate will be.
Being knowledgeable about how this works can provide you with confidence when you’re having a conversation with your Mortgage Advisor.
Good news…I’ve put together a list of factors that determine how your interest rate is determined.
This will help you better understand why there are so many variables in home loan interest rates.
Home price and loan amount: Also known as the “Loan to Value” (LTV) Your home price minus your down payment will determine how much you’ll borrow which helps determine how much the interest rate will be.
Down payment: Generally, a higher percentage down payment equals a lower interest rate. The more money you put down, the more stake you have in the property.
Loan term: Shorter terms (like a 15-year or a 20-year) generally have smaller interest rates than a 30-year term.
Interest rate type: Interest rates come in two basic types: fixed and adjustable (ARM) Fixed rates do not change over time. Adjustable rates, on the other hand, have an initial fixed period then go up or down based on the market. For example, a 3-year ARM loan will have a fixed-rate for the first 3 years and then the rate will fluctuate from the 4th year onward.
Loan type: Different categories of loans (like conventional, fixed-rate, FHA, etc.) have different rates.
Credit score: Primarily based on credit report information usually sourced from credit bureaus. Typically, this is called your FICO score and is based on your credit history.
Quick tip: Don’t focus solely on interest rates. Interest rates might be identical from loan to loan but fees can vary widely.
To put it simply: Interest is the percentage of your loan that’s charged for borrowing money.
APR is how the interest rate will affect your payments over the course of an entire year, and includes any additional fees and potential mortgage insurance associated with the loan.
Knowing the APR gives you a straightforward way to compare the cost of one loan to another.
This is really the only way you’ll know the true cost of your loan.
If you’d like some free, no obligation help determining what your interest rate and new house payment will be, just click here