Comparing mortgage rates is essential if you want to get the best deal on your home purchase. However, are you truly aware of how the mortgage rate can affect your entire home purchasing process?
Mortgage rates and loan estimates are packed with various data, statistics, and calculations that can seem like a foreign language, especially if you’re a first-time home buyer.
Don’t worry. Learn all you need to know about mortgage rates, how they work, and how to get the best deal on mortgage rates.
What Are Mortgage Rates?
Mortgage rates are essentially the rate of interest on your house loan. This rate refers to the interest you’ll pay annually/monthly for the home loan you take out.
Lenders or banks determine how much the mortgage rates will be. Mortgage rates can be either fixed-rate or adjustable-rate.
Suppose your lender said you’d have to take out a loan with 5% mortgage rates. It means you’ll have to pay 5% of your total loan each year until you pay it off.
Mortgage Rates Deciding Factors
Lenders set mortgage rates on a borrower-by-borrower basis. They consider the borrower’s financial status as well as broader economic conditions.
Personal Financial Factors
- Borrowers credit score
- Borrowers credit history
- Loan type, size, and terms
- Size of down payment
- Loan-to-value ratio
- Debt-to-income ratio
- House location
Overall Economic Factors
- Strength of economy
- Current inflation rates
- Employment situation
- Consumer spendings
- The stock and bond market
- Federal reserve policy
- Construction and market conditions for housing