Home Interest Rate

Home Interest Rate - Home interest rates vary from borrower to borrower. Even with the same types of mortgage loans, what rate one person qualifies for does not mean that is what rate another person will qualify for. Home interest rates are based on a variety of different factors. Here are a few of the more important factors that help determine what home interest rate you qualify for:

* LTV (Loan to Value) - the amount your home is worth compared to the amount you are borrowing
* Your credit score - generally the higher your score, the better your rate
* Loan type - Fixed, adjustable, interest only, Pay Option ARM, etc...
* Income documentation types - full income verification, stated income documentation, no ratio, no doc, etc...
* Property type - owner occupied, primary residence, 2nd home, vacation home, rental property
* Loan Purpose - purchase, refinance, cash-out refinance, rate/term refinance, debt-consolidation refinance, etc...

When shopping for home interest rate quotes do your best to shop around between different lenders on the same day. Rates change constantly and can change from one minute to the next and throughout the course of each day. If you shop for home interest rates at different times and on different days, you may not find the best home interest rate available because you were not comparing "apples to apples."

The home loan interest rate you pay may not be the full amount of interest due on your mortgage. If you are in a 1%, 2% or other low payment mortgage, you are generally deferring interest.

Your interest rate is influenced by simple things you may not have thought of. Whether your are financing your primary residence or a vacation or investment property affects your rate. Also, whether you choose to pay your property taxes as part of your mortgage payment or pay them separately influences your interest rate.

You home mortgage interest rate is the fee paid on borrowed money. The lender receives a compensation for foregoing other uses of their funds, including (for example) deferring their own consumption. The original amount lent is called the "principal," and the percentage of the principal which is paid/payable over a period of time is the "interest rate."

Home interest rates today are still relatively low compared to other periods of time in the US. This has made homeownership affordable for more borrowers than ever.

When you receive a home interest rate quote, be sure to ask about the cost associated with the rate. Some loan officers will quote you a low rate without mentioning the number of points or high fees necessary to get that rate. They know that most people will tend to go with the lowest rate. However, paying points and high fees in order to get a lower rate is not always beneficial. There is a break even point that should be considered. If you pay $8000 in points and fees to receive a lower rate, and you save an additional $100 a month in interest, it would take you over six years to reach your "break even" point and before you start to realize a true savings. Offering a home interest rate quote with an extra-low rate, without mentioning the number of points and explaining the true costs, is a deceptive tactic used by some loan officers. Choosing to work with an honest and up-front mortgage professional will ensure that you receive a competitive rate and a loan that is right for you.

What determines my interest rate? - There are a great number of factors that affect the interest rate that you will receive on your mortgage loan. Lenders base the interest rate on how much risk you represent to them. They are lending a considerable amount of money, and need to know that they will receive a safe return on their investment.

The main and most obvious factor in determining your interest rate is going to be your credit history and your credit scores. Your credit actually affects many different things other than just mortgage interest rates. Your homowners insurance premiums, auto-insurance premiums, credit card rates, all other loan rates, and much more. This is why it is very important to keep your credit in good standing, all payments made on time, and not to let accounts go into collection.

The mortgage program can also determine your interest rate. Obviously 30 year fixed rates will be different than 15 year fixed rates. The same is true if you are doing a stated income, or no doc loan. The less documentation, the greater the chance that the interest rate will be higher.

The residency status of the property will also affect your interest rate. Investment or Non Owner Occupied properties will carry a higher interest rate due to the increase risk involved.

Loan to value ratio is another key driver of the interest rate. That is, the amount of the mortgage loan divided by the appraised value of your home. If below 80%, you'll qualify for the best rates. As the LTV increases, rates will also increase as this represents additional risk for the lender.

The type of property being used to secure the mortgage may also have an effect on the interest rate. It is no secret interest rates on commercial properties are higher than that on residential houses. Some banks also charge higher interest rates on cooperative units.

The type of documentation you can provide to verify income can affect the interest rate. The least amount of risk and thus the lowest rate is for full documentation, W-2s and pay stubs. The most amount of risk is for "No Doc" loans. There are many different levels in between with varying ways to document the income. Your mortgage broker can help you determine what type of documentation is appropriate for your situation.

Your payment history on your mortgage is also very important. Obviously, if you have never missed a payment on your mortgage you will qualify for the highest rating. Typically lenders will review your payment history over the last 12-24 months.

How can I get a lower mortgage rate - There are many ways to receive a lower mortgager interest rate. You can buy the rate down by paying points, you can refinance after your house has earned equity or by increasing your credit score.

Often, you can get a lower rate by choosing an Adjustable Rate Mortgage. The average homeowner lives in one house for less than 5 years. Adjustable Rate Mortgages that are fixed for 5 years before adjusting have a slightly better rate than 30 year fixed mortgages.

One way to get a lower rate on your mortgage is to obtain a mortgage on a buy-down program. A 2/1 buydown is a common type of buydown program. What this means is that you will have pay a fee to be able to get an initial interest rate that is 2% lower than the final interest rate for the first year of the loan, the next year the rate will go up 1% and then the 3rd year the interest rate will be fixed for the life of the loan. This type of loan helps out people who are very close to their maximum debt ratio that is permitted by the bank, and also people who may want to qualify for a little more expensive of a home.

The general rule to refinancing is that when you are able to lower your interest rate by more than a percentage point, you will exceed the cost to savings ratio.

You can shop 3 different Mortgage Brokers for the lowest interest rate. Shopping more than 3 could damage your FICO score. Usually the Mortgage Broker with the lowest interest rate has higher closing costs.

If you bought your home with 100% financing and have a PMI payment you may now have enough equity to refinance to a lower rate and eliminate the PMI payment. If you bought a new home in the last 3 years and your rate is over 7% you should call your mortgage broker and talk to them about refinancing to a lower rate and what your options at this point are.

Getting a lower rate often comes with a substantial cost, and may not result in getting a lower payment. If your real goal is to minimize your monthly payment, talk to your mortgage professional about options which may allow you to minimize your monthly payments.

If for some reason you can not get a lower rate, because you do not qualify for one, then you may be able to get a lower mortgage payment. You can lower your payment by taking an interest only loan, increasng the amortization schedule (15 year fixed to a 30 year fixed), or in some cases a pay option ARM.

If you are purchasing a home one way to get a better rate is to put more money down. If you put more money down, the bank is taking less risk so the rate is lower.

If you opt to escrow your taxes and insurance your rate may be lower. Having the bank collect for taxes and insurance on a monthly basis and pay them when their due elevates one more concern and possibility for additional liens or foreclosure, so again there is less risk so a lower rate.

You may be able to seek out credit repair, prioe to obtaining a new mortgae loan. This could drastically and quickly (Depending who you use) change your credit score, and put you in a position to achieve a lower mortgage rate than you were previously quoted.