Posts Tagged ‘Home Mortgage Interest Rates’
Home Mortgages and Down Payments
When you are preparing to buy a home, you usually are not thinking of a down payment. Before you even consider answering an ad or going to an open house you need to think about a down payment. Knowing how much money you have to work with will affect every other decision you make when getting a home mortgage. It will affect and determine everything from your purchase offer, the home mortgages you qualify for, and even how you hope for home mortgage interest rates.
Take a look at your savings and your disposable income. You know your financial status better than anyone, so this should not take long. Determine how much money you have to work with that you could put toward a down payment and closing costs on a home mortgage loan. If you have limited resources, or if you are getting part of the down payment as a gift, your home mortgage options will be very limited. The same is true if you have enough for a down payment but need the lender to cover some of the closing costs, your options will not be very good.
The rules are different if you are borrowing the down payment from your 401k or retirement account. The home mortgage options will vary based on the lender you choose, but they probably will not be all inclusive. Really the only way to have unlimited choices in a home mortgage program is to have enough money for a large down payment and closing costs. In this case you can choose from fixed rate loans, adjustable rate loans, buy downs, graduated payment mortgages and all the varieties in between.
Another important reason to have an inkling of an idea about a down payment is when you are shopping for mortgage interest rates. Some home mortgage lenders will charge a higher interest rate for a smaller down payment. The mortgage interest rate will vary enough as it is, you should be as close as possible on this to get a closer estimate. Not only will you have different mortgage interest rates for fixed rate and adjustable rate loans, but also within those categories the different home mortgages will vary with the rate
If you are shopping mortgage interest rates over the phone, the loan officer will be able to tell you what you qualify for if you know how much of a down payment you have. They will also be able to quote you the right rates. Shopping mortgage interest rates online is also an option, and you have to know what home mortgage programs you qualify for.
It will affect how you write you purchase offer as well. You are required to put down your down payment when writing the offer and different home mortgage programs will have different rules as to how that affects your offer. Down payments are very important to your home mortgage, so being prepared is in your best interest.
How Mortgage Interest Rates Work
If you are considering a home mortgage, chances are that you woke up today and wondered what the mortgage interest rates would be if you signed on the dotted line. It seems like an easy question to answer, when in reality it isn’t quite as simple as knowing one rate. There are multiple rates and while the rates may be very similar, even identical, with each lender there is no guarantee. Not just that, the rate may change before you has driven to the bank anyway.
So where does a mortgage interest rate start? It begins with the fax machine in your home mortgage broker’s office. Every morning they will receive a fax that lists the day’s rate. On very active days it is not unusual to see this rate change several times throughout the day. There have been times when the rate has changed up to five times a day. These rate sheets are not for the public to see. They display only the rate that the loan officer is going to be paying more that home mortgages, not the cost presented to you.
The different rates have different costs. Higher mortgage interest rates won’t cost as much to the loan officer as a low mortgage rate would. This is due to the fact that the lender will earn more in interest on the home mortgage if the mortgage rates are higher. On the other side, it makes sense to charge more for a low mortgage rate since the lender will earn less interest in the long term. In some cases the home mortgage is considered to have a “rebate.” If the mortgage interest rate is high enough the loan officer will get paid back for issuing the loan at that rate.
A large majority of home mortgage lenders are paid on commission. The lender and the loan officer split whatever amount is earned off the home mortgage loan. So before quoting you a mortgage interest rate the loan officer will add in the amount that they want to earn. The individual company will have a policy on how much or how littler can be added. While this reigns in the loan officer, it still gives them a lot of flexibility with the mortgage interest rate.
In this way, it may seem that the loan officer’s goal would be to get you the highest rate possible. To some extent, this is true. But home mortgages are still a business and like any good business they do not want to overcharge their customers either. Your credit score will determine the amount of flexibility you get with the mortgage interest rate. The better your score, the more likely it is you will get a lower rate.