At first glance, how interest rates impact the state of the economy and our personal finances can seem complicated. When starting your homebuying journey, it’s important to know what an interest rate is, how an interest rate is determined and how that can affect your mortgage rate down the line. By entering your zip code, we can provide current mortgage rates based on where you’d like to buy a home.
What is an interest rate on a mortgage?
In the simplest of terms, an interest rate is the cost of borrowing money from a bank or lender. The rate determines how much you owe back to your lender, on top of the money you have already borrowed. Interest rates are constantly changing depending on various economic factors. Without interest rates, lenders would risk losing money without any reward. When shopping for a home, it’s important to consider your budget. Our affordability calculator can help provide an estimated loan payment amount, as well as help calculate any potential interest.
How can I get the best home loan interest rates?
Although you don’t have control over interest rates, there are things you can do to help lower the interest rate on your loan. Here are a few suggestions:
1. Maintain a good credit score
To help maintain a good credit score you’ll want to pay your bills on time, keep a low balance on your cards, reduce the amount of debt you owe and keep old credit card accounts open. These are just a few ways you can improve your credit score.
2. Show a long and consistent work history
This isn’t something you can do overnight, but it is something that will help in the future. If you’ve been employed at a company for a long time, or have held a relatively stable work history, this may increase your chances of getting a good interest rate.
3. Put more money down upfront
The bigger your down payment, the lower your loan and interest rate. If you’re able to put more money down upfront, you may qualify for a lower interest rate.
4. Consider an adjustable or fixed-rate mortgage
The agreed upon interest on a fixed-rate mortgage remains stable for the life of your loan. An adjustable rate often starts below the market rate but can increase over time, which can lead to a higher monthly payment.
5. Set up automatic payments
When you set up automatic payments, you reduce your risk of forgetting to pay your bills. Paying your bills on time, every time, may increase your chances of qualifying for a lower interest rate.
What are interest rates now?
Mortgage rates change often, so it’s a good idea to review them frequently to ensure you have the most current information on hand. There are tools that can help you quickly find current interest rates for the area you’re looking to buy a home in. You can also get a detailed rate and payment estimate by using a mortgage calculator.
Finding your current interest rate
Now that you know more about interest rates, we hope your newfound knowledge will come in handy when you research your next home loan. And we’re here to assist you as you move forward on your homebuying journey.