When it comes to getting a mortgage there are a lot of variables that can affect the interest rate you end up with. Some of these are out of your control such as the current economic climate while others are within your power to negotiate. Here’s a look at some of the things that can affect your mortgage rate and how you can use negotiation to your advantage.
Economic Conditions
One of the main things that determines mortgage rates is the state of the economy. If the economy is doing well rates will tend to be higher while if it’s in a downturn rates will be lower. This is because when the economy is doing well there’s more demand for loans and when it’s struggling there’s less demand.
Lender
The lender you use can also affect your mortgage rate. Some lenders are more competitive than others and may be willing to offer you a lower rate to get your business. It’s worth shopping around to see who can give you the best deal.
Type of Mortgage
The type of mortgage you get can also affect your interest rate. For example fixed-rate mortgages have rates that stay the same for the entire term of the loan while variable-rate mortgages have rates that can change over time. Variable-rate mortgages usually have lower interest rates to start with but the rate can go up or down depending on the market.
Term of Mortgage
The term of your mortgage can also affect the interest rate. shorter terms usually have lower rates but you’ll have to make higher monthly payments. Longer terms have higher rates but your monthly payments will be lower.
Down Payment
The size of your down payment can also affect your interest rate. Lenders often give better rates to borrowers who make larger down payments because it reduces the risk of the loan.
Credit Score
Your credit score is one of the most important factors that lenders look at when determining your interest rate. The better your credit score the lower your interest rate will be. If you have a poor credit score you may still be able to get a loan but you’ll likely pay a higher interest rate.
There are a lot of factors that go into determining mortgage rates and some of them are out of your control. However there are also some things that you can negotiate such as the lender you use and the terms of your loan. If you’re not sure what you can negotiate it’s worth talking to a mortgage broker or lender to see what’s possible.
Is it possible to negotiate a lower mortgage rate with your lender?
Answer: Mortgage rates are generally fixed meaning that you can’t negotiate a lower rate.
However there may be some wiggle room especially if you have a good relationship with your lender.
It’s always worth asking if you think you can get a lower rate.
How does your credit score affect your mortgage rate?
Answer: Your credit score is one of the biggest factors that lenders look at when considering you for a mortgage.
A higher credit score means you’re a lower-risk borrower which could lead to a lower mortgage rate.
Are mortgage rates currently rising or falling?
Answer: Mortgage rates have been on the rise since early 2018.
How can you get the best mortgage rate?
Answer: There are a few things you can do to help ensure you get the best mortgage rate possible.
First make sure your credit score is as high as it can be.
Second compare rates from multiple lenders.
And third consider a shorter loan term.
How much does a 1% difference in mortgage rate affect your payment?
Answer: A 1% difference in mortgage rate will generally result in a difference of about $1000 per year on a $100000 loan.
Should you lock in your mortgage rate?
Answer: Locking in your mortgage rate means that you’re guaranteed a certain interest rate for a set period of time usually 30-60 days.
It can be a good idea to lock in your rate if you know you’re going to be closing on a home soon and rates are rising.
What is private mortgage insurance?
Answer: Private mortgage insurance (PMI) is insurance that protects the lender if you default on your loan.
It’s typically required if you have a down payment of less than 20%.
What is the current average mortgage rate?
Answer: As of September 2018 the average rate for a 30-year fixed mortgage is 4.
87%.
How often do mortgage rates change?
Answer: Mortgage rates can change daily sometimes even multiple times in a day.
However they typically don’t fluctuate by much.
How long does it take to get a mortgage?
Answer: The amount of time it takes to get a mortgage varies depending on a few factors including the type of loan you’re applying for and the lender you’re using.
In general the process usually takes 30-60 days.
What do you need to get a mortgage?
Answer: In order to get a mortgage you’ll generally need good credit a steady income and enough saved up for a down payment (usually 20% of the home’s purchase price).
What is an adjustable-rate mortgage?
Answer: An adjustable-rate mortgage (ARM) is a type of mortgage where the interest rate can change over time.
The initial interest rate is usually lower than a fixed-rate mortgage but it can go up or down depending on market conditions.
How often can an adjustable-rate mortgage’s interest rate change?
Answer: The interest rate on an ARM can typically change once every year after the initial fixed-rate period.
What is a good mortgage rate?
Answer: Mortgage rates vary depending on a number of factors including your credit score the type of loan you’re applying for and the current market conditions.
In general a good mortgage rate is anything below 5%.
What is a points?
Answer: A point is a fee charged by the lender equal to 1% of the loan amount.
So if you’re taking out a $250000 loan one point would cost you $2500.
