Take the time to understand your credit worthiness and remember, all lenders go to the same trough for their money so, if you have a lender out of line with other lenders you've talked to, there's a chance you'll pay for that rate in fee's that the other lenders aren't charging.

Several Factors That May Affect Your Mortgage Rate

The amount of your loan can increase your interest rate if the amount financed exceeds the conforming loan limits established by Fannie Mae and Freddie Mac. The conforming loan limit changes periodically, currently the cut off is $359,650.

Shorter loans, such as 20 year or 15 year note, can save you thousand of dollars in interest payments over the life of the loan, but your monthly payments will be higher. An adjustable rate mortgage may get you started with a lower interest rate than a fixed rate mortgage, but your payments could get higher when the interest rate changes.

A larger down payment – greater than 20% - will give you the best possible rate. Down payments of 5% or less should expect to pay a higher rate as you are starting with less equity as collateral. If you've got the cash now and want to lower your payments, you can buy down your rate (pay points) to lower your mortgage rate. It's a simple concept, really: In exchange for an upfront fee, lenders are willing to lower the interest rate they charge, cutting the borrower's payments. Closing costs are fees paid by the lender, if you don’t want to pay all of the closing costs, the lender can "roll" them into the rate which will lead to a higher rate and a higher monthly payment over the life of the loan.

Credit quality and debt-to-income-ratio affect the terms of your loan through FICO Score and amount of debt you show on your credit report.  For advise on your qualifications, let us link you with a knowledgeable lender Now!

Under $200,000  $200,000 - $359,650 $359,650 - $650,000 Over $650,000

Under $200,000  $200,000 - $359,650 $359,650 - $650,000 Over $650,000

If you have good credit and your monthly income far surpasses your monthly debt obligations, you will get approved at the best possible interest rate.

Lenders allow you to choose from a variety of rate and point combinations for the same loan product. Therefore, when comparing rates from different lenders, make sure you compare the associated points and rate combinations of the offered program. The published Annual Percentage Rate (APR) is a tool used to compare different terms, offered rates, and points among different lenders for the same product.

Annual Percentage Rate (APR)

A tool used to compare loans across different loan programs is the Annual Percentage Rate (APR). The Federal Truth in Lending law requires mortgage companies to disclose the APR when they advertise a rate. It is designed to represent the true cost of the loan to the borrower, expressed in the form of a yearly rate. The purpose is to prevent lenders from hiding fees and upfront costs behind low advertised interest rates.

One confusing aspect of APRs is that the APR on 15 year loans will carry a higher relative rate due to the fact that the points are amortized over the 15 year term rather than the 30 year term. When a Regulation Z (the mortgage company’s disclosure of cost for the loan) is prepared for a buyer/borrower, the prepaid interest is also included in the APR calculation.

Even lenders admit it is confusing since it includes some, but not all, of the various fees and insurance premiums that accompany a mortgage. The rules for calculation of this number have not been clearly defined, so APRs vary from lender to lender and from loan to loan, depending on which types of fees and charges are included.

In addition, the APR model is flawed in that when a product is variable and tied to a market index, the index is assumed to never change. This obviously is an invalid assumption that can lead again to a number, which in fact can not be compared, from one quoting source to another.

Finally, the APR won't tell you anything about balloon payments and prepayment penalties or how long your rate is locked for. You can use APRs as a guideline to shop for loans, but you should not depend solely on the APR in choosing which loan is best for your needs.

Let one of our mortgage professionals help you understand your costs, they'll be more than happy to guide you through the different costs and comparisons Request a contact now!

Meeting with a Lender

You may prefer to meet with the mortgage lender or broker before house hunting to determine in advance how much you can afford and the mortgage amount for which you can qualify. This step is called pre-approval and can save you time and trouble by making certain you are looking in the correct price range. Also, it may well give you a greater bargaining position once a seller knows you are a serious buyer with a loan already available.

Locking Your Rate

A lock in, also called a rate lock or rate commitment, is a lender's promise to hold a certain interest rate for a specified period of time, while your loan application is processed. Depending upon the lender, you may be able to lock in the interest rate when you file your application, during processing of the loan, when the loan is approved, or later. This lock will insure that you are protected from any rate increase while waiting to close the loan.  It is always a good idea to discuss the mechanics of your rate lock with a qualified mortgage lender.

 

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