A mortgage enables you to purchase a house without paying the full price out of pocket at the time of the closing. For most people, buying a home is the biggest financial transaction of their lifetime. For that reason, if you’re in the market for a new home, it’s best to learn all you can before you get too deep into the process.
Here are some things to know:
- Rates Fluctuate Daily – Borrowers who are eager to secure a home loan with a low interest rate may get into the habit of checking mortgage rates as often as some people check the weather. Interest rates fluctuate every day, which means the rate you see today may be different than the one you see when you actually are approved for the loan.
- The Lowest Interest Rate Does Not Guarantee a Low Cost Loan – When looking for a lender, borrowers will often choose the one offering the lowest interest rate, but this can actually be to their detriment. There are other factors to consider, including Annual Percentage Rate (APR), closing costs, pre-payment penalties, and the lender’s policies on future equity loans or lines of credit.
- A Lower Credit Score Can Cost You Tens of Thousands of Dollars in Interest – Most people know that a higher credit score is generally awarded a lower interest rate, but not many people know to what extent this is true. A lower credit score can translate into tens of thousands of dollars in interest payments over the life of a home loan. If you’re thinking of applying for a home loan soon and your credit isn’t up to par, it may be worthwhile to spend a few months working to boost your score before you apply for a mortgage.
- The Housing Market Impacts Rates – While the Federal Reserve has one of the greatest impacts on the rise and fall of interest rates, the state of the housing market will affect it too. When the housing market is booming and lenders are granting loans on a frequent basis, they will be more inclined to offer lower interest rates to borrowers.
Buying a home will likely be the biggest purchase you ever make. Be sure to work with a trusted lender, like HVCU, to learn mora about the mortgage process before applying for a home loan.