What Factors Influence Your Mortgage Interest Rate?
When you go to buy a home, you will find that your mortgage interest rate is one of the most important aspects of financing a home. After all, the interest rate you get on your home loan can mean a difference of tens of thousands dollars in payback over the life of your loan.
Here are some of the factors that lenders consider when offering you an interest rate:
Your credit score and history. If you want the best possible rate, you need to have a good credit score and a good credit history. The better your credit, the lower your interest rate.
National rates. Mortgage rates across the country, the Fed rate and even the rates on Treasury notes have effects on mortgage rates. These items provide a basis for overall trends.
Debt to income ratio. This is a number that expresses how much of your income goes to paying off debt each month. If you have a high debt to income ratio, then you will be less likely to qualify for programs that offer the best interest rates.
Length of term. Realize that how long your mortgage loan term is set for affects your interest rate. If you have a 15 year mortgage, you will usually pay a lower interest rate than if you have a 30 year mortgage.
Type of mortgage loan. A variable rate mortgage will initially have a lower rate than a fixed rate loan. However, this usually changes over time, erasing the advantages over the long term. An interest only loan has an even lower initial rate, but the drawbacks almost always overcome the initial benefits.
Points. You can pay “points†up front when you get a mortgage loan, and these can reduce the interest rate, possibly saving you money over the long run.
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buy a home, home financing, interest rate home loan
October 28th, 2007 at 6:58 am
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October 30th, 2007 at 9:01 am
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