1) First, there’s a baseline for rates that is determined by the market – in very simplified terms, this is dependent on how the economy is doing. Lending institutions, and people like you and I, have no control over this baseline, which is why rates can fluctuate from week to week or even day to day. For example, in the current climate, mortgage rates typically range from about 3.5 to 5%.
2) Then there’s the property itself. Is it a detached single-family unit, or a condo? Your primary home, or an investment property? All those factors can affect your rate.
3) The type of mortgage you’re getting matters too. You can get loans with different payment terms, such as 15-year or 30-year fixed mortgages, which means you lock in the same interest rate and monthly payment amount for the life of the loan. There are also adjustable-rate mortgages, which have a fixed rate for a set period (such as 5, 7, or 10 years), after which rates adjust each year according to the market. Depending on what kind of loan you’re looking for, the available rates will be different.
4) Your credit score plays a big role in determining your rates. It helps lenders evaluate your ability to pay back your loans, based on your borrowing history. The higher your credit score, the better rates you’ll be able to get, which can lead to significant savings over the life of your mortgage.
5) The size of your down payment can also play a role in your rates (though not as much as your credit score). A larger down payment can mean less risk for a lender, which may allow them to offer you lower interest rates. However, I always remind customers that if you have great credit and steady income, a down payment as low as 3-5% can still be a financially sound option, allowing you to start investing and building equity sooner.
6) You have control over your rate too. You can “buy” a lower rate by paying a lender more up front in the form of prepaid interest called “points.” Or you can take lender “credits” to lower your closing costs, in exchange for a higher rate. (While buying a lower rate may seem appealing, keep in mind that depending on how soon you sell or refinance your home, it may not be worth the upfront expense.) 7) Of course, the final factor is the lender. Each lender is going to take all of these factors into account and determine the rates they will offer you. They also decide how much they will charge you in points or other lender fees to give you those rates. BE CAREFUL!! – this is where other lenders are known to bait and switch.
Finding the rate that works for you
Keep in mind that your Loan Estimate will include all closing costs, including an estimate of required third-party fees (like title, appraisal, recording fees, and taxes). These costs won’t impact your rate, but they may impact the size of your down payment since you’ll need to pay them upfront.
Of course, I am always here to help guide you. You can get on the phone with a Loan Consultant like me to talk through your options.
Getting Better prices
I have streamlined the mortgage process and eliminated a lot of unnecessary costs. So once you have your Loan Estimates from me, feel free to shop around.
I am so confident that I can get you the best terms that I have created this guarantee: if I don’t beat a competitor’s offer by at least $1000, I will pay you $1000.
What have you got to lose?? NOTHING
What have you got to GAIN? EVERYTHING (MONEY)!!