Other factors that can impact the mortgage rate you’ll receive include the loan-to-value (LTV), type of property you are purchasing, use of property, type of loan, term of the loan, timing of the quote, and the fees associated with the rate.
In this video, Mary explains these differences, so you understand the determining factors in the mortgage rate you’ll get on a mortgage, and hopefully help you get a better interest rate on your next mortgage.
Hello, I’m Mary Catchur. I’m the owner of Marimark Mortgage.
One of the questions I get most frequently is, “What is the interest rate today?” Or, “Why did my neighbor get quoted a better rate than I did?”
That question’s a little bit difficult to answer without knowing all of the specifics of you and what you’re purchasing, versus what your neighbor’s situation was and what they might have purchased. There are many factors that go into determining what your interest rate is.
For instance, credit score is a very big determining factor. Somebody with a higher credit score is going to get a better interest rate than somebody with a lower credit score. Those differences vary significantly, too, whether you’re doing a conventional loan or an FHA loan. An FHA loan isn’t as credit score sensitive as a conventional loan is.
It’s also going to depend on your loan-to-value. What is the loan-to-value? This is the relation between your loan amount and the purchase price, or the appraised value of the property you’re purchasing or refinancing. The lower your loan-to-value is, in other words, the more money you’re putting down, the better your interest rate’s going to be.
Type of Property
It also varies on the type of property you’re buying. A condominium is generally going to have to a higher interest rate than a single family residence. Also, a duplex, or other unique type property, is definitely going to have a higher rate.
Use of Property
Then, we’re going to look at the use of the property. Are you buying it to live in it? Is it an investment property, or a second home? The interest rate can vary based on those factors as well.
Type of Loan
Also, the type of loan. FHA loans generally are going to have a lower interest rate than a conventional loan. However, that doesn’t necessarily mean it’s a better loan for you. It also carries mortgage insurance requirements that maybe would be lower on a conventional loan, or maybe you wouldn’t have them at all on a conventional loan. So, you really need to look at the combination of the rate and other payment factors involving that loan. Lower rate is not always as good as it sounds.
Term of the Loan
Also, the term of the loan. Are you getting a 30-year loan? 15-year? Or, is it an adjustable rate mortgage? All of those are factors that are going to have an influence on the interest rate that’s quoted to you.
Time of the Quote
Another really significant factor is the time of the quote you received. I’ll get people that came to me with quotes that they got last week. Well, interest rates vary by the day, sometimes even change throughout the day. That quote you got is really only as good as the day you got it on. So, you want to make sure when you’re comparing rates between lenders, that you’re comparing the same programs, the same rates, at the same time.
Fees Associated with the Rate
Also, there are fees associated with rates. You may have a lower rate because you’re paying a higher fee to get it. If you don’t understand the relationship between the rate and the fees, you could not be making an informed decision on which is the better deal for you. So, it’s best to work with a mortgage lender that will explain to you all the factors and give you the various options you have. There isn’t just one rate available to you. It can depend on whether you want to pay more, or whether you want to pay less. If you’re comfortable paying more and it makes sense financially to lower your payment and pay extra, that might be the better solution for you. But if you’re limited on cash, then maybe you want to go with a higher rate and save on fees.
If you’re looking to purchase or refinance a property, we’d be happy to help you with a rate quote at no cost or obligation to you. Feel free to call us at Marimark Mortgage, 866-910-8020, or visit our website at www.MarimarkMortgage.com.
Marimark Mortgage is a mortgage broker serving all of Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients with HARP refinancing to lower their monthly mortgage payments.