Since housing represents the biggest cost for most households, buying a home typically stands among the most important financial choices Americans face. Whether you’re looking for a starter home, to find a bigger place for your growing family, or want to downsize in your retirement, there’s a good chance you’ll want a mortgage to make your new home a reality.
Roughly 60% of all owner-occupied properties have a mortgage, and the right rate can mean the difference between meeting monthly bills comfortably and cutting back on discretionary spending. It can also play a significant factor in paying off a mortgage versus having to sell a home just to get out of the loan.
What Is a Mortgage Rate?
A mortgage* is a loan that a financial institution offers for the purpose of buying a home. The mortgage rate is the interest charged on that loan. It’s expressed as a percentage of the total loan balance, and it represents the cost of borrowing money from the lender. The annual percentage dictates your monthly payment amount and total interest paid over the life of the loan.
A high mortgage rate? Not great. It means you pay more money each month and in total. A low rate is good because it means those figures are smaller.
What Affects Your Mortgage Rate?
There are several factors that determine mortgage rates over which you have no control. First, the Federal Reserve sets the federal funds rate, the nation’s benchmark interest rate. And the same dynamics that affect housing prices — demand in your area and current economic trends — also impact mortgage rates.
However, you do have some control over your credit score, financial history, employment, and how much money you can provide as a down payment. Through hard work and careful planning, you can get a more favorable mortgage rate.
How To Get the Best Mortgage Rate?
Here are some approaches you can take to secure a lower interest rate:
Wait … and Work
While the wisdom of waiting for market conditions to change is hotly debated, you can wait until you personally are in a better position.
Is your credit score less than strong? Pay off as much of your debt as you can and establish positive spending patterns. A better credit score can lead to a better mortgage rate. Stable employment is also key. If you got a new job six months ago, waiting another year can make your employment look more secure.
Make a Large Down Payment
While you wait, save as much money as you can. A larger down payment means a smaller mortgage.
Choose the Right Mortgage Type
Not all loans are the same. A 15-year mortgage probably offers a lower rate than a 30-year one. If you’re a veteran, a VA loan may offer better rates. For others, especially first-time buyers, FHA loans are available to those who may not qualify for loans through the traditional process.
Compare Mortgages
Compare mortgage rates at different financial institutions. You never know how different they may be.
Talk To Us
Vectra Bank has helped make the dream of homeownership a reality for countless Coloradans. Contact a Vectra Bank professional today to discover what kind of mortgage* you can get.
*All loans subject to credit approval; terms and conditions apply. Contact a banker for full details.
