Helpful Mortgage And Real Estate Advice

How Does The Interest Rate Factor In Securing A Mortgage Loan?

By on November 18, 2013 in Mortgage Rates, Mortgage Videos

Your monthly mortgage payment is greatly influenced by the interest rate you agree to when taking out the home loan. Appearing like a lesson in gambling, interest rates are never completely stable. They fluctuate each day by tenths, hundredths and thousandths of a percent. When you secure a mortgage loan, the interest rate factors in on several different levels.

Look For A Good Deal

You may have been watching the interest rates lately if you have been in the market to buy a new home. Because the rates have been so low, buyers have many options when they turn in their home loan application. Ideally, you want a low interest rate so you can concentrate your purchasing power on the property’s principal. In essence, you can afford a more expensive home if you have a lower interest rate. High interest rates cause your monthly mortgage to increase, making less funds available for a larger property.

Adjustable Versus Fixed

As you compare different rates, you may jump at a 3 percent rate advertised on an adjustable, 15-year loan. Although you want a low interest rate, be careful about the loan’s specifications. An adjustable rate moves dramatically each year, based on economic conditions. It can potentially jump an entire percent, creating a huge new monthly payment to pay. Fixed rates remain the same throughout the loan’s life. They are typically higher, but you have the security of no surprise mortgage hikes in the future.

Lock It In!

If you haven’t decided on a loan, or haven’t been approved yet, lenders have the ability to lock a rate for several days to ensure that your loan matches the estimated monthly payments. You must commit to the loan within the lock period to keep the promised rate. Once you allow the rate to expire, you must lock a new, and potentially higher, rate for the same loan.

Ask About APR

APR, or annual percentage rate, is a larger value that lenders must provide you. This rate encompasses your locked in interest rate, mortgage insurance and points. There may be other fees associated with your loan as well. Ask the lender for a detailed account of these expenses to make sure the loan is processed correctly.

From your credit history to income level, you are offered interest rates based on many different factors. Talk with your lender about all your options, including a lock in rate. Finding the perfect home must coincide with selecting a fair interest rate.

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About the Author

About the Author: Jessica Lucas is the managing editor for Mortgage Home Base, a top real estate finance blog dedicated to helping borrowers and home buyers understand the home loan process. Follow Jessica on Google +, and share your comments here. .
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