Interest Rates

One of the primary items you’ll be looking at when you come to a mortgage company like City Creek Mortgage is your interest rate. Also called a mortgage rate, this is perhaps the largest individual financial factor involved with most mortgages.

Do you have any control over getting the best mortgage rate possible? Absolutely. Let’s look at a few of the main factors that influence interest rates, and how you can use them to get the best deal possible.

Market Factors

Maybe the largest factor for many people is the market as a whole, which can fluctuate based on several complex economic factors. These factors are outside any individual control – the best you can typically do here is keep a keen eye on the market and look for opportune moments to get the best rates. At City Creek Mortgage, our brokers can give you some great industry tips on factors that might cause future markets to raise or dip.

Size of the Loan

For the most part, a larger loan amount will equal a higher interest rate. The lender is taking a higher amount of risk by loaning you a larger amount, and the higher mortgage rate reflects that.

Loan Type and Length

The two primary loan types for most people are adjustable-rate mortgages and fixed-rate mortgages. Adjustable-rate mortgages tend to have lower starting rates, but note that these can raise during the period of your loan if the market dictates it. Fixed-rate loans generally have higher starting interest rates, but you get the security of knowing they’ll never go up.

The length of your loan is also important. 10- or 15-year terms generally come with lower rates than 30-year terms – again, it’s just about risk for the lender.

Down Payment

The more money you can put down up front to minimize the lender’s risk, the better rate they’ll give you. Some lenders will require a 20 percent down payment for certain types of loans, though this isn’t always a hard and fast rule.

Credit Score

The factor you have the most individual control over is your credit score, which can get higher or lower depending on your success paying down various forms of debt. There are certain types of loans you can’t even be approved for without a certain threshold credit score, and for many others, credit score will be a huge crux point for your final interest rate.

Want to learn more? Contact the expert brokers at City Creek Mortgage for more information on any of our mortgage solutions.

While the prospect of buying a home is always exciting, your enthusiasm can often be offset by the stress that comes from securing a mortgage. Typically, the reason why so many become anxious when shopping for a mortgage is simply due to unfamiliarity. This is especially true if you are a first-time homebuyer. As is the case with any financial transaction, you want to get the best deal possible, yet at the same time, don’t want be unrealistic in your expectations.

Understanding Interest Rates

When people refer to the “cost” of a mortgage, they’re specifically talking about the interest rate. Interest is essentially the price you pay for taking out a loan, and for many first-time buyers, is incredibly misunderstood. Many only focus on the amount they are asking to borrow, then later find out that they could end up paying almost twice that much in interest by the end of the loan repayment period. Thus, when searching for a mortgage, the interest rate should be one of the primary factors you consider.

Securing the Best Rate

While a difference of a few percentage points may not seem like much to you right now, you’d be amazed at how much a slightly higher rate adds up to over 15-30 years. Therefore, you should do all that you can to find the lowest rate possible. Here are some tips to help accomplish that goal:

  • Pay attention to your credit score: Your personal credit rating goes a long way to not only determining your eligibility for a loan, but also what rate you’ll pay. The better your score, the better interest rate you’ll earn.
  • Contact multiple lenders: If you have multiple interest rate offers, you may able to negotiate a better rate by asking your preferred lender to match that of a competitor.
  • Understand your mortgage options: If it’s predicted that interest rates may drop in the future, getting an adjustable rate mortgage might be your best option. However, with a fixed-rate mortgage, you don’t risk paying more of rates rise instead of fall.

Ultimately, what’s most important to remember is that you do have options (after all, it’s called “shopping” for a mortgage for a reason). Familiarizing yourself with those options will not only help to remove much of the stress that can come with buying a home, but also may end up saving you tens of thousands of dollars over the life of your home loan.