One of the primary goals of people who take a mortgage is finding the best rates possible. If you are going to be stuck with a mortgage for 30 years, then you would want to make sure you are making monthly payments you are comfortable with.
But how does your lender calculate what interest rate to apply on your mortgage? Well, several factors may come into play. A trusted mortgage company in South Jordan cites some of them.
1. Your Credit Score
Your credit score is perhaps the most important factor when a lender is determining what interest rate to offer or charge you. Generally, aspiring homeowners with high credit scores get lower interest rates than those with lower credit scores. That’s because lenders are more willing to take a risk on people with a clean credit history than those with a history of delaying or defaulting on debts.
2. Loan Amount
Lenders tend to charge a higher interest rate if the loan you are taking is particularly small or particularly big. The size of the loan you take will, of course, depend on the price of the house you are planning to buy. Therefore, it’s a good idea to scout the neighborhood to learn about the prevailing home prices. Ultimately, you want to buy a home that’s neither too large nor too small for you and your family.
3. The Down Payment
Paying a bigger down payment attracts a lower interest rate as a lender sees that there’s a lower level of risk if you are willing to take more stake in the property. If you can raise at least 20 percent of the home’s total cost and use it as down payment, you are more likely to enjoy lower interest rates.
Your mortgage is going to be a big part of your life for a significant period, so you need to move carefully as you apply for one. Knowing the factors that influence mortgage rates can help you make the right decisions.