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11 Factors That Will Determine Your Mortgage Interest Rate When Applying for a Home Loan!
11 Factors That Will Determine Your Mortgage Interest Rate When Applying for a Home Loan!
Your Mortgage Interest Rate is determined by several factors when applying for a home loan. When purchasing or refinancing a home, the interest rate on a mortgage will play an important role in how much you will have to budget each month. It is important that one is aware of how these rates are set so that they will be able to obtain the best rate being offered that day. Understanding rates can make the difference in saving hundreds or even thousands of dollars each year.
Lets explore how and why the mortgage interest rate is determined at the time of locking your rate.
1) Property type – Single Family Home, 2 to 4 Units, Condominium, Manufactured Owner Occupied, 2nd Home and Investment purchase
2) Loan Amount – determined by the county you wish to purchase your property in, loan amounts under $125,000 and over $417,000 typically will bare a higher interest rate
3) Down payment amount – the more you investment in the down payment the lower the rate will be, higher the down payment lower the rate with Conventional type financing
4) Impound account – electing not to have an escrow account where you pay your property taxes and insurance will come with a slightly higher rate
5) Financing type – FHA, USDA, Homepath, VA, Conventional and Jumbo products will have an effect on the mortgage rate
6) Credit Score – the middle score of the 3 bureaus will determine rate
7) Term of the Loan – 30, 20, 15 terms, short the term lower the rate but higher the payment
8) Fix or Adjustable rate – Fix rate are fix for the selected term of the loan, where as the adjustable will have a low start rate and has the potential to increase once the adjustment period is over
9) Market Conditions – One of the biggest influences when determining your interest rate. The mortgage rates are tide to the 10 year Bond and that moves everyday. When the 10 year bonds moves up or down then the interest rates move in the opposite direction
10) Mortgage Insurance – Coming in with less than 20% down on a Conventional type financing will have an influence on the rate. FHA will always have mortgage insurance no matter the down payment
11) Lock periods – 15, 30, 45, 60 and 90 day locks, short the lock period lower the rate, longer lock periods higher the rate
The best scenario to obtain the lowest mortgage interest rate when purchasing or refinancing a home can be placed in two categories.
1st scenario – 25% down payment, 740+ middle credit score, single family home and loan amount over $125,000 with a 15 day rate lock
2nd scenario – 40% down payment 720+ middle credit scores, single family home and loan amount of $125,000 with a 15 day rate lock
As you can see what determines what your mortgage interest rate is when applying for a home loan. When you hear on the radio or find surfing the web may be mis-leading because with these 11 factors, a lending professional will need to review you complete loan application and discuss your options before a final rate is presented.
I encourage you to call me at 909-503-5600 to ensure we maximize the very best loan product based on your current situation and if we need to, lets work on improving that situation to obtain the lowest mortgage rate.
11 Factors That Will Determine Your Mortgage Interest Rate When Applying for a Home Loan!
by Nathan Rufty
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