Are you curious to learn how mortgage rates are determined, or how you could get a lower rate on your new home loan? We’re experts in getting borrowers the best available rate with the lowest fees and the best service. Velocity Lending is your trusted, local mortgage broker, and we’re here to shed some light on the confusing nature of mortgage rates.
For starters, let’s discuss what a mortgage rate is. “Rate” is the simplest way to describe the percentage of interest you will be responsible for on your home loan. Mortgage interest rates fluctuate based on several things. One of these is they abide by the law of supply and demand. The more people who want to buy a house, the more demand there is for mortgages, and rates rise to profit from this need for home financing. When the market slows down, and a smaller number of people are needing home loans, rates fall to entice people to get a mortgage. Another thing that affects mortgage rates is inflation. Because inflation devalues the US dollar, it devalues everything that is purchased with US dollars, such as homes. The state of the bond market, as well as the housing market, can affect rates as well.
At this point, there’s a good chance you’re wondering, “What can I do to get a better rate for my loan?” Despite all the external circumstances that dictate mortgage rates, there are a few things you can do as a borrower to get different interest rates. First and foremost, working with a trusted mortgage broker is going to help you find the right rate and product for your unique situation. They are going to do the shopping for you to look at several different lenders and the pricing and rates they are offering for your home loan. Rates for borrowers are calculated based on economic health, credit score, the purpose of the home purchase (owner-occupied, second home or investment), and the loan amount. Another way a borrower can try to get a better interest rate is by having a good credit score. We can lend to people with as low as a 580 credit score, but to be eligible for the best rates available, you’ll want to be around 740. You can also invest more initially into the property with a larger down payment or buy discount points to bring your rate down further. On the flip side, you also could increase your rate to cover closing costs, if cash flow is an issue.
Now that you are armed with an understanding of how mortgage rates work, let’s work on getting you into a new home or building your investment portfolio. With rates still at a historic low, it’s a great time to get a home loan. We’re here to help!
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