4 Factors That Affect Your Mortgage Rate
When it comes to getting a mortgage, ideally you want to get the lowest interest rate possible. A difference of a few percentage points can literally equate to thousands of dollars. There are a number of factors that can influence your mortgage rate. Understanding these factors before you go in can make all the difference in the investment of your new home.
Amount of your loan
When your loan amount exceeds the loan limits set by Fannie Mae and Freddie Mac, your interest can increase. Alternatively, when it’s lower, it can decrease. This loan limit changes at the beginning of each year.
Length of your loan
It makes sense that the longer the life of your loan is the more interest you are going to pay. A shorter loan can help decrease this, but you may find that your monthly payments will be higher as you are paying it off quicker.
A down payment of over 20% will provide you with the best possible interest rate for your home loan. When your down payment is less than 5%, you should expect to pay a higher interest to offset the lack of collateral.
If your credit score is between 760 and 850, you can expect to receive the best interest rate offers. However, if your score is below 620, your interest rates are going to be considerable higher, as you are deemed a “subprime” borrower.
It is one thing to have bad credit in today’s wo ...
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