Did you know that almost six million homes were sold in the United States in May of 2021 alone? Every year, millions of people find and purchase their dream homes.
But just because buying a house is a typical event doesn’t mean it’s easy. There’s a great deal you have to know to avoid setting yourself up for a bad situation.
One of the most important things to familiarize yourself with is mortgage rates, as this knowledge will help you compare loan offers and find the best one for you. To learn everything you need to know about mortgage rates, just keep reading!
What is a Mortgage Rate?
Before we get into specifics, let’s start with a basic overview of what mortgage rates are. Loans aren’t given out for free. Your lender will charge a certain amount in interest, which is how they make money from the loans they offer.
The amount you’re charged in interest is your mortgage rate. In other words, it’s how much it will cost you to take out your home loan.
There are two types of mortgage rates: fixed-rate and adjustable-rate. With a fixed-rate loan, you lock in your monthly payment. It will be the same throughout the entire span of your loan. Adjustable-rate loans, on the other hand, can fluctuate, meaning your interest rate can (and will) rise and fall over time.
What Determines Your Mortgage Rate?
Mortgage rates differ from year to year and buyer to buyer, depending on a number of different economic and personal factors.
Economic factors are things out of your control, they’re what make up the larger financial state of the country at the time of purchase. These factors include the strength of the economy, employment and inflation rates, and consumer spending, as well as housing and mortgage market conditions and the yield of other markets.
This can be a bit discouraging, but the personal economic factors that are under your control can make a big difference in your mortgage rate. Your credit score will be a major deciding factor. To get the best mortgage rate, ensure that your credit score is at least 760 before applying for a loan.
Professionals also recommend having a down payment of 20 percent or more, minimizing your existing debt, and taking out the smallest loan in comparison to the home’s value. To learn more about how the pros handle home buying, check out this process.
Understand Mortgage Rates Before Entering the Home Buying Process
The home buying process can be daunting, especially if you haven’t done your research before jumping in. By familiarizing yourself with mortgage rates and other factors included in the purchase of a home, you can take a lot of the stress out of house hunting.
As you can see, to get the best mortgage rate possible, you need to prepare well in advance. That way, you can ensure your credit score and other financials are impressive to a financial institution.
Looking for more tips and tricks for navigating the world of real estate like a pro? Be sure to check out our blog!