When buying one of the hottest homes for sale in Rockport-Fulton or refinancing your current loan, getting the lowest mortgage interest rate is the goal. Less interest means more money will stay in your pocket throughout the life of your loan. Moreover, it makes it easier to meet the debt-to-income requirement of your prospective lender, which is convenient if you have a lot of monthly expenses.
Most people can list the things that can affect their interest rates with common sense. An excellent credit score, high income, and a short loan term are the recipe to qualify for the most favorable rate available, right? Not exactly. It’s more complicated than that.
More things come into play when lenders judge the interest to charge. Apart from market forces, here are some of the borrower-specific factors that help determine the mortgage interest rate you can get:
Buying an already built property increases your chance of snagging a low-interest rate than applying for a cash-out refinance. In the latter, you’d be turning your home’s equity into cold cash, which lenders generally perceive to be risky.
If the real estate market goes sour down the road, the property’s value might go down and the loan could sink under water. To compensate for the risk of having a house with low equity as security for the mortgage, the lender might ask for higher interest.
The more money the lender loans to you, the more skin it will have in the game. Again, a greater interest rate is a tool used to offset to a high level of risk involved in the transaction. This is why your lender might reward you with less interest if you put down a larger sum.
Condos and townhouses are usually the first properties to drop in value when the market crashes, and the last to increase when things look bright. Single-family detached homes are your safest bets.
While mortgage interest changes are out of your control, you can negotiate for a lower rate if you put yourself in a good position. Take the time to improve your credentials and understand how things really work to cut the best possible deal in your situation.