When applying for a mortgage loan, every borrower hopes to receive the best rate possible. However, many may not be certain what factors actually determine the rate they receive.
Check out our list below of the top 5 things that could be driving your mortgage rates through the roof!
1) Credit Score
This is a given and many are aware that in order to receive the best rate possible, your credit score must meet your lender’s credit threshold.
If your score is under that threshold, you could end up paying more interest as opposed to someone whose credit score is higher.
If you are mortgaging a property that isn’t your primary residence, you could pay significantly more in interest.
Because second homes are riskier investments, interest rates reflect those risks lenders must take into account for negative possibilities.
3) Loan Amount
If your loan amount is really high or really low, you could pay more in interest. Loans over or under the conforming loan limit could possibly see raised interest rates due to lenders having to make up costs.
4) Down Payment
Generally speaking, putting down a higher down payment could make your interest rate lower. This is because the more stake you put into your future property, the less of a risk you become.
5) Type of Interest Rate
There are two types of interest rates: fixed and adjustable. A fixed interest rate stays the same whereas an adjustable rate changes based on the market.
You typically can get a lower adjustable rate; however, over time that rate could go up or down.