Searching for your family’s dream home can be one of the most rewarding tasks you and your partner ever do, except when you have to crunch the numbers.
You may relate to comparing mortgage rates more aggressively than the home your kids will grow up in. Our team believes your home financing adventure does not have to be difficult, and your family can enjoy your new home for a lifetime.
We can walk you through current mortgage and refinance rates so you can see how the market is doing before you buy. Rates move with the news, and nobody can time them perfectly. Our team also wants to educate you on how mortgage rates work and how to get the best one for you, so you can be confident in your loan decision.
What are mortgage interest rates?
You agree to pay off the house’s value over a set time period when you sign with a trusted lender on a home loan. However, they will add an interest rate on top of the home’s cost to compensate for their lending services. Each month, you will pay the lender a percentage of the home’s worth as a mortgage interest rate based on your credit score and current finances.
Here’s an example with made-up numbers, not a quote. Say you borrow $300,000 on a 30-year fixed loan at 6.5%. You’d pay about $19,400 in interest in the first year alone, and more than $380,000 in interest over the full 30 years (360 months). Even a fraction of a percent changes those totals, which is why it’s worth finding an affordable and viable mortgage rate.
Aren’t Mortgage Rates the Same as APR?
We do not want you to receive the wrong idea of what your future loan expenses will cost based solely on your mortgage interest rate because that does not reflect the true cost. APR accounts for lender and broker fees that you will pay at closing and during the loan’s term. These fees go beyond the Federal Reserve’s or our mortgage rate amounts.
For example, your APR will consider broker fees, discount points, private mortgage insurance, origination costs, closing costs, and other figures that mortgage rates do not total. You may think you’re saving big on your family’s future home with a small percentage, but you will be further in debt than you realize if you partner with the wrong lender or forget other associate costs.
Looking at the typical private mortgage insurance (a part of APR calculations) is a great way to understand why APRs reflect your true monthly payment. A lender will implement this insurance if you have a down payment of 20% or less to protect them if you default on the loan.
This reasonable fee will drive up your costs to paying .55% to 2.25% of the loan amount each year. You would be coughing up $1,650 to $7,500 with our previous loan example, not including the mortgage rate and $300,000 loan amount.
It is vital that you speak to a lender to inquire about the APR on the loan type you want. While you can check mortgage rates online, APRs require a meeting with an in-person lender, who will walk you through finding the best APR.
How Can I Lower My Mortgage Rate?
You might be glancing at the mortgage rate statistics for the past few weeks on the housing market and not find numbers that suffice your budget. Thankfully, there are ways you can decrease your percentage and get the mortgage payment your family can afford for their lifetime happiness.
Discount Points
Discount points are a fantastic option to lower your monthly interest percentage if you have the extra cash in hand to invest in your family’s long-term financial future. They are additional fees you can opt to pay at the loan’s start that decrease your mortgage interest rate. 1 Discount Point will cost 1% of the home’s price, so a single point with your $300,000 home loan will run you $3,000.
In principle, the more discount points you put down, the lower your interest rate will become, and the less your family will pay for compensating the lender. A lender is more than willing to receive less compensation from a family they can trust to pay their loan in full without the fear of default.
Mortgage Locks for the Lowest Mortgage Rate
Finding the lowest mortgage rate for your kids’ childhood home can be daunting when percentages constantly change day by day. Rates can update only after a few hours sometimes, but a trusted home lender can secure you the best rate without worrying that it will disappear if you partner with one.
A mortgage rate lock is a process your home lender takes you through where they approve the loan and interest rate you desire and promise to give you them at closing. No matter how much the market rates fluctuate after that lock, they guarantee your rate will stay the same on your mortgage loan unless it is an adjustable-rate mortgage arm. Look closely at your home finance paperwork since your percentage is subject to change without notice if the adjustable-rate mortgage has a term of 1 year or less.
However, mortgage rate locks will last only for a short time window, so you and your spouse should secure a percentage with a home lender after you all decide on a mortgage rate. Their goal will be to finish this process before closing.
What affects mortgage and refinance rates?
Your mortgage rate starts with the broader market, but it becomes personal when a lender reviews your application. Inflation expectations, the economy, and demand for mortgage-backed securities can move rates for many borrowers. The Federal Reserve does not set mortgage rates directly, but its decisions can influence the bond market and borrowing costs.
Your credit history, income, debts, down payment, loan-to-value ratio, loan amount, property use, and loan program help shape the offer you receive. A stronger credit profile and more equity can reduce a lender’s risk, but no single factor guarantees a lower rate. Fixed and adjustable-rate loans, and shorter and longer terms, also carry different tradeoffs.
Because every borrower and property is different, an online calculator can only estimate your rate. A lender needs your full application and current market conditions to give you a personalized quote.
How should I compare mortgage and refinance offers?
Compare offers made on the same day for the same loan amount, program, term, and lock period. Look beyond the advertised rate. Review the APR, discount points, lender fees, closing costs, mortgage insurance, and the total monthly payment so you are comparing the full cost.
A lower rate is not always the least expensive choice if it requires more cash upfront. For a refinance, compare the closing costs with the monthly savings and how long you expect to keep the loan. If you are considering cash-out refinancing, remember that it increases your loan balance, so weigh the new payment and long-term interest against the reason you need the cash.
Rates can vary among lenders, so ask for written Loan Estimates and compare them side by side. A mortgage broker can gather options from several lenders, but include any broker fee in your comparison.
We Can Secure Your Lowest Mortgage Rate
Your family will be ecstatic when you all first walk through your new house’s front doors. However, you need the right mortgage rate to get there, acquiring the initial loan that will carry your family’s financial health throughout the loan’s life. It is imperative that you choose a finance lender to secure a mortgage rate lock since checking online mortgage calculators alone will not give you that number.
Our trusted home lenders are available to meet with you and create a personalized loan package for whatever type of loan you choose. We can assist you in timing the market with our expertise for the perfect time to make a move and help you qualify. Give our team a call at (480).800.8387 to go on this exciting home loan adventure with us!