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Factors That Can Effect Mortgage Rates |
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There are several factors that can affect mortgage rates, these include the current market, your credit score, and what type of loan you choose. Let's take a closer look at these factors. The Current Market Mortgage rates can fluctuate naturally because of different factors. First, mortgage lenders can be tempted to give you a specific interest rate depending on how houses are currently selling. For example, if houses are harder to move, lenders may be willing to settle for a lower interest rate in order to get good buyers in the door. Secondly, inflation will play a part in what kind of mortgage rates you are offered. This is because lenders have to take inflation into consideration when determining how much profit they can make off of your loan, since most mortgages will last from 10 to 30 years. Lastly, how the economy is performing can also have an impact on your mortgage rates. For example, if the economy is currently bad and unemployment rates are high, anyone can seem like a bad risk if the likelihood that they may lose their job is high. In a period where labor jobs are being shipped overseas, an assembly line employee may have a harder time getting a mortgage at a decent interest rate, whereas someone in a different line of work may have no trouble at all. Your Credit Score Your credit score will have a great impact on what kind of mortgage rates you will be quoted -- it is also the factor that you can have the most influence over. The worse your credit score is, the higher you interest rate will be. You can get a home loan at 580, 620 may get you a decent rate, and a score over 700 will give you a rate that you can be happy with. The good news is that you don't have to wait until you have perfect credit to apply for a home loan. Thanks to mortgage refinance, you can get a mortgage now, at a high interest rate, and then refinance, for a lower interest rate, once your credit score is at an acceptable level. What Type of Loan Your Choose What type of loan you choose will also have an effect on the mortgage rates you are quoted because often time a shorter mortgage will equate to a less risky loan. Therefore, those who want a 5-10 year loan may end up with a better interest rate than if they would have chose a 20-30 year loan. Also, if you choose an adjustable rate mortgage -- rather than a fixed rate mortgage -- your mortgage rate has the freedom to fluctuate throughout your loan term as current market rates change. The timing of your home loan is important in order to secure the best mortgage rates. If you go at a time when housing trends are not favorable, the economy is bad, and your credit score is low, then your chances of obtaining a decent mortgage rate will be slim. Ideally, you would like at least two of the above factors to be in your favor when you apply for a home loan. |
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