What will change your mortgage's interest rate?

If you're looking for the best mortgage rates, it's important that you know what's taken into account when calculating its interest rate. Here are the 6 variables that can lower or increase it.

Your chosen type of mortgage

There are many available mortgages on the market. So many, that's very possible that you'll find one that covers your needs. They each come with a different interest rate, which is one of the items to consider. In addition to these, there are special loans for veterans, people with low income, and other unique requirements that need to be met in order to qualify for them. You can use this mortgage calculator!

Your FICO score

As a lender, one of the most important things to avoid when giving a loan is not getting the money back. This is why borrowers with good credit scores are the first ones to be chosen: they represent a smaller risk to lenders. When calculating your score, keep in mind that [the one you get could be a different one than the one your lenders receive, which is completely normal.] (LINK A NOTA)

Your property's location

There are more and less expensive areas when it comes to house-hunting. This can impact the amount of your mortgage, which can be conforming in expensive areas of the country. There's a difference if you're buying a house in a rural area, in a small city, or in a big one.

Your home's price and the mortgage's amount

The overall cost of your house and the size of your mortgage will have an impact on your future mortgage rates. If you only consider these variables, you can sort the mortgages' amounts into three categories, each with a lower or higher rate. From smallest to largest amounts and rates, there are: conforming, super conforming, and jumbo loans.

Your down payment's size

It's simple: the larger your down payment, the smallest the lender's risks, the lower the interest rates on your loan. This has to do with was said at the beginning: lenders don't want to take risks, which is why they prefer at least a 20% of the mortgage loan's total as a down payment, because they'd lose less money if you were unable to pay for the rest.

Your term's length

On the same line as before, it's less risky for the lender if they offer a short-term loan. This way, a long-term one will bring you much more interest and you'll end up paying a lot more at the end of the term. If you're deciding your term's length, try to keep in mind the total amount you'll pay with a short- and a long-term mortgage.

Read more about tips to find the right mortgage provider in this article.  

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