What Affects the Interest Rates of Your Mortgage?

Mortgage interest ratesIf you’re like most borrowers, getting the lowest possible interest for a mortgage is probably your main goal. This is understandable as rates can determine your monthly payments, as well as the overall cost of the loan.

Experts at Primary Residential Mortgage, Inc. list some factors that can affect the interest rates of your mortgage in Portland:

Credit score

Lenders will check your credit history to determine your reliability in paying the loan. In most cases, having a high rating gives you an advantage in scoring for lower rates. Mortgage companies in Portland note that a higher score also makes it easier to qualify for a home loan.

Loan term

Mortgages with a shorter term usually have a lower rate and total cost. The only downside is that you’ll need to make higher monthly payments. Loans with a lengthier term may have lower monthly payments, but this also means that you’ll be paying off the loan for a longer time.

Type of interest rate

Fixed and adjustable are the two common types of interest rates. The former involves rates that will remain constant over the life of the loan. The latter, on the other hand, has a lower initial rate, which may increase or decrease later on.

Down payment

Making a higher down payment enables you to score a lower rate, as this means less risk for lenders in case you default on the loan. The ideal is 20% of the home price, but you can put more money down if you are able to do so. If you pay less than 20%, your rates may be higher and you’ll need to pay private mortgage insurance (PMI), as well.

Loan type

There are different types of loans and they all bear different rates. Common mortgage types include conventional, Federal Housing Administration (FHA), and VA loan. It is a good idea to learn the common features of different loan types.

Property location and loan size

Mortgage companies have different pricing tiers, depending on where you want to buy. The value of the property can also affect your rates. You may, for instance, need to pay a high-interest rate if you plan on borrowing a significantly large mortgage.

If you’re considering getting a mortgage, it is a good idea to learn more about your options. You can also talk to reliable lenders in Portland or wherever else to determine the type of loan that suits your needs and financial situation.

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