Your interest rate is not what you see online…While you must have been exposed to tons of mouthwatering mortgage advertisements on various forms of media, it would surprise you to find that these adverts are not as rosy as they appear. The explanation below helps clarify the situation.
Exploring the process of interest ratesFor a proper insight into the processes of interest rates, we must begin from the foundation. Mortgage interest rates are unstable and will change every day by increasing or decreasing. You, Freddie Mac, offers adequate insight into mortgage interest rates with consistent weekly reports on American rates for widely held mortgages following a study of financiers from all over the nation. When you get information on interest rates, it is most likely about the aforementioned category of rates and news on such interest rates often come when there is a dramatic decline.
Mortgage banks desire your businessMost mortgage companies have sites and platforms where they advertise their own interests. While these ads might seem very appealing and suitable, you may be wondering why you get a different interest rate from what is advertised. The reason is that the ads are merely an average. For an insight into the actual rates, it is imperative that you look closely at the contract to know what it entails. Mortgage banks provide numerous interest rates with some being favorable and some being expensive. It is advisable that you refrain from taking a big leap.
There 6 following factors will influence the rate you get:
- Credit Score: Having a great credit score is a major plus when it comes to getting a favorable interest rate. Credit score offers insight into your financial credibility. Expectedly, having an high credit score will trigger a reduced interest rate. This is applicable if your credit score is not exactly excellent but merely okay. Conversely, having poor credit scores will attract unfavorable interest rates. This is because creditor see you as not being financially credible.
- Initial downpayment: While most people are oblivious to this, making down payment is a great way to influence a favorable interest rate. When you offer some money, the creditor perceives you as being more financially credible. This effect can be likened to having a solid collateral for a loan. When you offer as much as one quarter of the loan, you will dispel any form of doubt while increasing your chances of having a favorable interest rate in cases where you don’t have that much for a down payment, you can offer PMI as well. Nonetheless, there are chances that you will get a favorable loan for less than 20%. It all comes down to the creditor.
- Kind of Assets: the kind of asset is also a major consideration that determines the kind of interest rate you get. For instance, a building complex would attract a little more interest than detached houses. Even the difference between buying a house or condo can effect your interest rate!
- Diverse Product: factors that may influence the interest rate includes the mortgage product. Mortgage product comes with diverse offers, stipulations and interest rates. More so, when you are seeing low interest rate it doesn’t mean that mortgage program is beneficial for you. Sometimes, it is better to get a bit higher interest rate and better program for a long term that’s why it’s better to select a reliable good mortgage banker and provide all details about your goal and overall financial situation. This way you can get a better service and right program for you.
- Period of loan: just like you guessed, loans that last for brief periods will attract much lower interest rates. It is expected that the interest rates rises commensurately with the timeframe. The growing pervasiveness of adjustable-rate mortgage is because they offer very minimal mortgage.
- Amount of loan: The logic behind this is very simple. If you request big loans, you will attract a higher interest rate. We recommend sizable initial payments for better interest rates.