Shopping for the best rates
With interest rates the lowest in decades, many borrowers are out there shopping for a loan. Mortgage lenders adjust their rates based on perceptions of risk, so unless the borrower can show they’re a low-risk individual, the borrower is unlikely to qualify for a rate that matches those seen in recent advertisements and headlines.
There is one thing for certain regarding mortgages today, the requirements for getting a loan are constantly changing. What someone was told were the requirements a few months ago, may not be the same today. This applies for both purchases and refi’s. So if it has been awhile since you last talked with your banker or mortgage broker, it would be wise to touch base again and get the latest facts.
Here are some considerations you should keep in mind when shopping for the best rate.
- The rates quoted are averages drawn from a variety of financial institutions, and lenders use varied approaches to set them. Consumers who want to try for the lowest rates available need to consider basic factors, such as credit score, points, property type, down payment, and length of the loan.
- Credit score: The ideal borrower has a FICO score of 740 or higher, which puts the individual in the best place for pricing.
- Points: The lowest rates usually are decreased by paying a fee called a point, or 1 percent of the loan amount. Borrowers may buy points in order to get the best rates at many banks. Points might make sense depending on the borrower’s financial situation and how long they expect to stay in the home.
- Property type: Borrowers planning to buy a duplex or a four-unit build likely will have a higher interest rate. Condominiums also may have a rate premium rate, especially if they are newer or the down payment is less than 25 percent. Lenders also may charge more if the borrower is not planning to live in the home.
- Down payment: Borrowers who put down at least 25 percent are more likely to obtain the best interest rates. Lenders offer different breaks on rates if equity in the property is higher, so borrowers should ask what is available.
- Length of loan: Borrowers who are likely to move in a few years may want to look into an adjustable-rate loan with a low interest rate fixed for a few years, and adjusted afterword.
Thank you for reading this post. If I can ever be of help in finding you the perfect property here in the Napa Valley, please email me at Curtis@NapaValleyAddress.com
Your Napa Valley Broker Extraordinaire, selling Real Estate from its heart, Yountville
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