Perhaps the most important consideration out there when searching for a mortgage loan is mortgage rate. The interest rate you qualify for on a mortgage might be the single largest factor in determining whether the mortgage ends up being a positive or negative financial investment.
At Altius Mortgage Group, we’re dedicated to providing our clients with the best possible rates and resources for improving rate qualification. What are some of the most important factors that go into determining interest rates for a mortgage?
Credit score might be biggest individual factor in determining rates for mortgages. It’s as straightforward as possible here: A high credit score gives you a better chance at a low interest rate, where a low credit score likely limits you to pretty high rates in most cases. Proper attention to your credit and debt payments leading up to a mortgage application is vital.
In many cases, the higher the loan amount, the higher the interest rate. This is usually simply because lending a larger amount counts as larger risk for the lender, and they have to adjust accordingly. Especially for jumbo loans, which exceed typical maximum loan limits, expect higher standard rates.
The way your loan is structured can also be a varying factor for interest rates. Adjustable-rate mortgages tend to have lower rates than fixed-rate mortgages given how much they can change over the years, and shorter loans may come with lower rates. If you can afford higher monthly payments, try to lower the length of your loan to 10- or 15-year terms to get a lower rate.
The more money you’re prepared to put down up front toward the loan, the better. Lenders will view a higher down payment as offsetting risk, and will generally make your interest rate lower. The threshold here is often 20 percent of the loan total, though if you can go even higher, that’s even better.
This is a broad factor that will be present no matter how organized or disorganized you are on the other elements we’ve mentioned. Mortgage rates in recent years have been relatively low, but this is always a factor that can change based on a number of exterior factors.
Have questions about this or any of our other mortgage services? Our expert mortgage brokers at Altius Mortgage are standing by.