What factors can affect my mortgage interest rate?
Did you know if you called to get a mortgage, and your best friend called the same day, you could potentially get two different mortgage rates? How could this happen? Why?
The Consumer Financial Protection Bureau’s website, http://www.consumerfinance.gov/, which is a government-run website, put together a list of seven factors that can affect your mortgage interest rate. Here is the list (and a link to the page on the CFPB website):
1) Your Credit Score. Check your credit rating, and if there are errors, work to get them corrected as quickly as possible.
2) The Location of the Home. Yes, the location of the home that you desire to mortgage can affect your mortgage rate! It can vary by state, but also by location. The CFPB notes that rural areas may have specific restrictions, and specific loan types open to them.
3) The Price of the Home and Mortgage Amount. Jumbo loans, for example, tend to have higher interest rates than standard loans. This also applies to the downpayment vs the amount of the loan.
4) Amount of Downpayment. In general, if you put more money down, your interest rate may be lower. This may not always be the case, though, as there are a number of other factors!
5) The Length/Term of Loan. For example, a 15 year fixed rate loan may have a lower interest rate than a 30 year fixed rate loan. Often, this comes with a higher monthly payment, but a lower rate, and shorter time to pay the mortgage off.
6) Type of Interest Rate. Have you heard of an adjustable rate mortgage? This is where one would generally see a much lower interest rate up front, but it is a shorter term loan, and it can be adjusted, sometimes yearly. The CFPB website has a really good explanation of loan options, including interest rate types on their website at this link.
7) Your Loan Type. FHA? VA? Conventional? Interest rates can vary widely between these loan types, and you may or may not qualify for each kind or type of loan.
The Consumer Financial Protection Bureau’s website is a useful tool in learning more about mortgages and what is out there.
There could be other factors that may come into your interest rate and affordability for your individual loan situation. The above is a very general look at factors that could potentially affect your mortgage interest rate.
If you have specific questions about your mortgage situation or needs, please feel free to contact Dan Murtaugh with Sandy Spring Mortgage, who writes articles for me on this site. He is very knowledgeable about the many different mortgage types available to Baltimore homebuyers!
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