Homebuyers searching for the best mortgage for their needs will hear a lot of terms that they may be unfamiliar with, and some they may be familiar with, one of which will be mortgage rates.
Understanding mortgage rates will help you find a mortgage that you can afford, as well as when to look for a better rate.
Mortgage Rates Are The Rate Of Interest On A Mortgage
When looking to finance a mortgage, mortgage rates are one of the main details that homebuyers consider. This is the rate of interest on a mortgage that you will pay over the life of the loan.
Mortgage Rates Are Determined By Your Credit
Mortgage rates are determined through factors such as your credit score, the housing market, and stock markets, among others. Lenders will also take your borrowing risk into consideration—the higher the risk, the higher the rate. This is to protect the lender’s financial investment should you default on the loan.
Mortgage Rates Vary Between Lenders & Will Fluctuate
You will need to shop different lenders when searching for the right mortgage rate for you. Rates will vary from lender to lender and will fluctuate depending on factors such as the housing market. If you choose the first rate you come across, you could miss out on a lower rate elsewhere.
Mortgage Rates Can Be Fixed Or Variable
Mortgage rates can be fixed or variable, depending upon your choice. A variable rate will fluctuate throughout the life of the loan, while a fixed rate will not change.
A fixed rate the most predictable, since monthly payments will not change over the life of the loan. Even if mortgage rates go up or down your fixed rate will not. You can refinance down the line if rates go down and you have built up enough equity in your home.
A variable rate will go up or down depending on what the rates are that period, causing your monthly payments to fluctuate. Your lender will offer rates with amortizing or non-amortizing. A variable rate is one that homeowners can choose if they believe rates will fall and can take advantage without refinancing.
Ask About Locking Your Mortgage Rate
When you find a mortgage rate that works for you, you can ask your lender to lock in the rate for a certain amount of time while you search for another rate, protecting . A mortgage rate lock is an agreement between a lender and borrower that will guarantee that if rates go up, the rate you have locked will remain the same. Your lender may charge a fee to lock the mortgage rate.
Always talk to your lender and real estate agent about the best mortgage rate options for you and your unique situation.