5 Factors Other Than Your Credit Score That Affect Your Mortgage Rate
If you’re planning to purchase a home or refinance your current mortgage, it’s important that you identify the lowest mortgage rates available before you lock in. Like most borrowers, you’re probably all too aware of the role your credit score plays in determining the rates you’re offered. But you may not know about these other influential factors that can affect your mortgage rate. 1. The state you live in. Mortgage rates vary from state to state. The variance is complex and has to do with foreclosure laws. Regardless, if you live in Idaho and you’re planning to move to California, make sure you find out what rates are available in your destination state before you make any hard and fast financial plans. 2. Whether you plan to live in the home. If you’re purchasing a home to live in as your primary residence, you’ll receive the interest rate advertised by your lender for that purpose. This rate is called the owner-occupant rate. But investment properties, such as vacation rentals and second homes, require a higher rate. Let your lender know whether or not you plan to live in the property as soon as possible when shopping for a mortgage. 3. The amount you plan to borrow. The total amount of money you need to borrow to purchase your home will affect the rate you’re offered, too. 4. The down payment and points you pay up front. This is a major determining factor. Your interest rates can vary by multiple percentage points in accordance with the amount of money you’re able or willing to lay down at closing. Lenders often use points to reduce rates. The more points you pay, the lower the rate you’ll receive. Down payments work the same way. 5. The lender you work with. This is the most important factor to consider, since it’s the one that’s most directly within your control. Different lenders offer different rates. Each broker or loan officer you contact will quote you something different, and it’s up to you to compare these offers and sniff out the best deal. |
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