When you begin shopping for a home mortgage, you may be drawn to advertisements for ultra-low interest rates. These may be rates that seem too good to be true. However, in many cases, you may be unpleasantly surprised and even disheartened to learn that you do not qualify for the advertised rate. You can structure your loan in a more advantageous way by learning more about the factors that influence your interest rate.
Your Credit Rating
One of the most important factors that influence an interest rate is your credit score. Lenders have different credit score requirements, but most have a tiered rating system. Excellent credit scores qualify for the best interest rate, and good credit scores may qualify for a slightly higher rate. Because of this, consider learning more about your credit score. Take the time to correct any errors that may be resulting in a lower score.
The Amount Of Your Down Payment
In addition, the amount of your down payment will also play a role in your interest rate. The desired down payment may vary from lender to lender, but as a rule of thumb, the best interest rates are given to those who have at least 20% to put down on the property This does not include subordinate or secondary financing. If you are applying for a higher loan-to-value loan, you may expect a higher interest rate.
The Total Loan Amount Requested
In addition, the total loan amount will also influence the rate. There are different loan programs available but one of the biggest differences in residential loans is for very large loan amounts. The qualification for a jumbo loan will vary for different markets. These loans qualify for different rates than conventional loans with a smaller loan amount.
While you can use advertised interest rates to get a fair idea about the rate you may qualify for, the only real way to determine your mortgage rate will be to apply for a loan and to get pre-qualified. Contact your local mortgage lender today to request more information about today’s rates and to begin your pre-qualification process.