It might be daunting for anyone to go after their dream house. Today’s economic conditions may turn off the younger generation to opt for any significant financial commitment. The fear of huge mortgage rates is real, as it can drain your paycheck and cause a downgrade in lifestyle.
Yet, mortgaging a house may be one of the best decisions you’ll make for yourself. Not only does mortgaging nets you the ownership of a permanent shelter, the value of the house and lot may only appreciate in time.
Anyone who’s looking to make big investments must do so by making informed decisions. So today, we’ll teach you how to minimize your dues and get the best mortgage rates. Hopefully, this information can minimize your anxiety from the unknown and guide you as you set life goals.
LOAN AMOUNT
Borrowing anything higher than the conforming limit set by Fannie Mae and Freddie Mac—also known as jumbo loans—may incur a higher mortgage rate. In San Benito County and Santa Clara County, this is set at $679,650. However, it can vary in some areas or states. It might seem that the lower the total loan amount, the lower your mortgage rate would be. This isn’t necessarily true — small loans may also incur a higher mortgage rate since the bank still wants to profit from your loan. Your best bet is to shoot for something between $100k and whatever the limit is.
DOWN PAYMENT
Bigger down-payments means better mortgage rates. If your mortgage loan is $300k and you pay a $75k, you’re only really borrowing $225k from the bank. The same principle of the loan amount applies here, decreasing the amount of your monthly dues.
Although, down-payments are a different thing since some lenders have varying policies. If some lenders are only going to lower your rate with a 20% down-payment, you may be lucky to find a lender that requires a down-payment as low as 5 to 10% before lowering your rate.
LOAN TERM
The longer the bank needs to wait before full payment, the higher interest rate would be. However, opting for a shorter loan term may cause higher monthly payments. If you think you are able to shell out more money monthly, go for the shorter loan term. If you think you want to take it slow and steady, go for the longer loan term. Still, explore your options to find the perfect balance and carry the burden you’re capable of lifting.
TYPE OF INTEREST RATE
If you’re opting for a fixed mortgage rate, you’re choosing to pay the same amount of rate monthly and this won’t change over time. Adjustable rates, however, increase or decrease according to the market. Our advice: Again, explore your options. Fixed rates are usually reliable, but adjustable rates are a wild card — you never know when the market will suddenly be your friend or enemy.
CREDIT SCORE
Since the bank is trying to minimize risk, your mortgage rate is influenced by how risky you are — and credit scores are an objective assessment of how much of a financial risk you are to the bank. The higher the credit score, the more they want to invest in you. Lower scores, however, could get you higher rates. Worse, you may not even get a loan.
To keep a high credit score, you must establish yourself financially responsible. This means you pay your bills on time, don’t abuse your available credit, and don’t already have a large amount of debt, and so on. Click here to know more about credit scores.
If you want to really make an informed decision, you need professional help. Luckily, we here at Golden Eagle Mortgage Group would be happy to assist you. If you have any questions as an aspiring homeowner, contact us here!