4 Things That Determine Your Mortgage Rate

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Cervone Deegan + Associates knows that anyone who wants to buy a home soon is going to want to secure a home loan at the lowest rate possible. This was maybe a bit easier to do in recent years but nowadays the landscape has changed with rising home loan rates. However, if you are looking to do your best to combat today’s rates, here are some things you can focus on that impact your rate.

Loan Type

There are a bunch of different types of home loans out there these days. Begin by reaching out to your local lender and seeing what you may qualify for. In the meantime, the Consumer Financial Protection Bureau states “There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose.”

Credit Score

Your credit score plays a significant role in the rate that you can get. Freddie Mac states “When you build and maintain strong credit, mortgage lenders have greater confidence when qualifying you for a mortgage because they see that you’ve paid back your loans as agreed and used your credit wisely. Strong credit also means your lender is more apt to approve you for a mortgage that has more favorable terms and a lower interest rate.” Additionally, it is best to refrain from opening new accounts or making larger purchases during this time.

Loan Term

Another way to get creative with your potential rate is to look at the length of the term that you will take your mortgage for as the associated rate will change. Freddie Mac says “When choosing the right home loan for you, it’s important to consider the loan term, which is the length of time it will take you to repay your loan before you fully own your home. Your loan term will affect your interest rate, monthly payment, and the total amount of interest you will pay over the life of the loan.”

Down Payment

Finally, you can play around with how much you want to put down which can also lower your rate. These days many buyers who are at least second-time buyers may have significant equity from their previous home to put down. The CFPB shares “In general, a larger down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So if you can comfortably put 20 percent or more down, do it—you’ll usually get a lower interest rate.”

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