Despite recent fluctuations in the housing market, economists agree that home ownership is still key to building wealth. Owning a home allows you to build equity and place your money in an investment that will grow in value.
For most folks, buying a home requires getting approved for a mortgage. This can be a frustrating and complicated process, especially for folks who aren’t familiar with taking out loans.
Luckily, we’re here to help. Check out this mortgage guide to learn how to get the best rates when you buy your home.
Factors that Affect Interest Rate
When you start looking at mortgage options, it’s important to understand what factors will affect the mortgage rates available to you. This will help you anticipate what range of rates you can expect.
Factors Outside Your Control
Many of the factors that determine interest rates are outside of your control. Most mortgage lenders set a range of interest rates based on a variety of market factors.
If the interest rates are not good at the time you are looking for a mortgage, sometimes it is best to wait for a market adjustment.
Factors In Your Control
That said, there are many factors that impact the interest rates you’ll get that are, at least somewhat, in your control. For instance, many lenders establish their ranges of interest rates based on your credit score. If you are applying for a mortgage with a spouse or partner, their credit score will be considered as well.
The size of your down payment can also affect your rate, as can whether you choose conventional or FHA financing.
Fixed Versus Variable Rate Mortgages
Whatever interest rate you choose, you also have the option to go with a fixed or variable rate loan. A fixed loan will have the same interest rate for its entire life, while a variable loan will vary with market changes.
The benefit of a fixed rate loan is predictability. Your monthly payment will stay the same for as long as you have the loan. That said, a variable rate loan has the benefit of allowing you to take advantage of lower rates that become available without having to refinance.
Few people would consider buying a house after only looking at one option. But many folks make the mistake of taking out a mortgage from the first institution they work with.
When you’re considering where to get your mortgage, make sure to look at different types of institutions. For instance, your bank or credit union likely offers mortgages, but you can also consider working with a mortgage broker. Local organizations like Metropolitan Mortgage Corporation can often offer competitive rates.
Putting This Mortgage Guide to Work
With these mortgage guide tips in hand, you will be on your way to getting a mortgage with a great interest rate. This is an important step in investing in your future.
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