Mortgage Rate

What is a Mortgage Rate?

Mortgage rate is basically the type of home loan taken on to purchase a home which is dividing in five different parts comprising of collateral, principle, interest, taxes and insurance. While the home itself is considered as the collateral on the loan, principle is the initial amount of the loan. Taxes and insurance amount is usually an estimated figure that varies according to the location of the home. And the interest charged is known as the Mortgage Rate. The interest charged on the mortgage can be either fixed which means it will remain same throughout the term of the loan or it can be variable which means it will fluctuate with a bench mark interest rate. 

The borrower is subjected to the specific risk while catching up with a mortgage. Interest rate on the mortgage basically depends upon the amount of risk involved on mortgage. The higher the risk, the higher will be the interest rate. the interest rate on the mortgage also depends upon the credit score of the borrower. The higher credit score indicated that the borrower is financially strong and is capable of making repayments for the debt.

Are mortgage Rates Negotiable?

Mortgages are as easy as negotiating for any other product or services. Through the amount of Mortgage rate you will be given depends on how much you will be able to convince the lenders on their commission. Be it for purchasing a new home or for refinancing an existing loan, the best way to do it is through taking up bids from a few lenders. If you are looking for grabbing more affordable mortgage rates then there are several free mortgage comparison websites that can help  find the best possible option The same will make the mortgage process all more easier and help you find a faithful estimate including the fine print.

Another important way of lowering amount on your loan is through Asking the lender to shave of a little bit on your higher interest rate depending on your strengths. For example - Borrower with excellent credit history are attractive for lenders. Meaning if you have a nice credit score, a number of assets and an ability to show your income, you'll have much more leverage. In such a scenario, you can obtain quotes from multiple lenders and receive the required favorable interest rate through pitting those lenders against one another. Credit score and loan to value ratio is probably the most important factor required to determine your mortgage rate.

Buying Down Your Interest Rate

Buying down the interest rate on your home loan means paying an extra amount with the purpose of reducing the interest rate on the mortgage. It is just like lender who covers up the borrower’s closing cost by charging a slightly higher interest rate, the door swings both ways. Borrowers can essentially buy a lower interest rate upfront.

While buying a house you cannot over look the interest rate charge on the mortgage. While paying huge amount for the home, even the single percents of the interest rate would make great impact on the bottom line. Thus, the idea of buying down interest rate definitely makes a great different, especially when it comes to making long term loan repayments. 

Borrowers can essentially buy a lower interest rate upfront. Mortgage companies typically reduces 0.25% of interest rate in exchange of the 1 point of the home purchase point. The lower interest rate will not just help you save on your monthly loan installments but will also reduce the amount of interest paid on loan over the period of time. Though initially you might think that the extra amount of $30 paid on your loan is not worth it but the same will turn out to be saving for about $10457 of amount as interest amount on your 30 years loan. 

Types of Mortgage Buydowns

Simple Mortgage Buydown

  • Borrower pays a discount point to lower their Interest rate for the entire life of the loan.
  • Applicable for all Conventional, FHA, VA, and USDA loans

 3-2-1 Mortgage Buydown

  • 30-year fully amortized loan
  • Interest rate increases at 1% every year for the first three years of the loan
  • Fixed rate for the remaining loan term

2-1 Buydown Mortgage

  • 30-year fully amortized mortgage
  • Interest rate increases at 1% every year for the first two years of the loan
  • Fixed rate for the remaining loan term
Do mortgage Rate Change Daily?

In one word, yes! Though there is a detailed explanation to that, so let us just give it look to understand it in a better way. 

Every morning from Monday to Friday, banks receives fresh mortgage rates which is said to be the price of the day.through interest rates do no necessarily differ everyday, there can be a difference in the rates of Friday and the one received on Monday. Sometimes, the rate you quoted on Friday morning can change in Friday afternoon. 

Due to these fluctuations, it is very important that you lock the suitable rate when the time is right. To lock in mortgage rate means giving your commitment to the lender for taking up mortgage at a specific rate. Though the task to lock in the rate can be daunting, it can be done smoothly with the help of a trustable mortgage lender. 

To help you further, there are certain days when you can lock in the required rate. There are certain days of the week that follows a typical trend when it comes to choosing a mortgage rate. Mondays usually have the most stable rates, whereas Wednesdays and Fridays remain unpredictable. There is definitely some risk involved in the process of choosing the desired mortgage interest. 

Mortgage rates are unpredictable, it is the economic trends that affects the mortgage rates including factors like employments rate, home sale and consumer confidence. Sometimes, the economy is slow and the employment is up, the same eventually cause a fall in the mortgage rates. Similarly, when the demand for the home increases the interest rates too shoots up. Thus, keeping the fluctuating scenarios of mortgage rates, it would be advised to keep an eye on the daily rate changes be it through lender or check it on your own online.

How to get the best Mortgage rate?

Buying your own home through taking up a mortgage is a huge financial commitment. Choosing the best mortgage type is a difficult task especially if you are a first type home buyer. Though the best advice anyone would give you in this regard would be to compare the mortgage rates from all the different lender in the market. Apart from that, there are various other factors to ensure yourself the best mortgage deal. The factors include -

You’re self employed - One of the most important criteria for lenders to offer mortgage is that the borrower should be self employed and have a stable source of income. For the same you are subjected to submit few documents that provides the proof of your finance and the reports which states that the tax is being paid every time. The same will help lender establish trust on the borrower and the same will serve it as a proof to the borrower’s creditworthiness. 

Credit Score - The best mortgage rate and terms goes to the borrowers with good credit score or the minimum FICO score of 760. Therefore, before you apply for the required mortgage, get yourself a copy of your FICO credit score to know where you stand.    

Debts - Lenders looking forward to advance credit to the borrowers with no or least debt. If your’s is higher then you can get better mortgage rate at small loan amount. Or else, try and pay your debt as soon as possible and increase your income

You Can’t Afford 20% Down - Though you can try to get loan at a very low, say 3 percent of down payment but then you need to pay for the private insurance that will safeguard lender in case you will not be able to repay the loan amount. The best is to pay for about 20 percent of the down payment on your loan. If you are unable to pay the huge amount then you can look for a short term loan or see what are the programs you are eligible for the same. 

Already Denied by Other Lenders - Almost all the lenders follow same criteria when it comes to approving the mortgage, if you are being denied for the mortgage amount by one or two lenders then there are very chances that you will also get denied by the third lender. thus, what is better is to look for the problem because of which you are being denied on your loan and try to fix it as soon as possible.

10 Tips to Get a Better Mortgage Rate

To buy a home you will need a mortgage which means that you will not just require to buy home but also for a home loan. Infact, you need to first look for a mortgage professional and then start searching for a home. One of the major factors to consider before finalizing your mortgage professional is the amount of rate charged, as there are a lot of variables available for the same. You can also seek the help on online calculations in order find the best mortgage professionals who can provide you the most preferred mortgage deal. However, there are some important conditions that are required to be fulfilled by the borrower to be able to find the best deal for himself or herself. Here are the 10 tips that will help you get the best mortgage deal for yourself. 

Your Credit Score - One of the major aspect any lender would see before providing you the required mortgage is your credit score. Borrowers with good credit score are like assets to lenders. Therefore, having a good credit score can definitely help you secure one of the best deal on your mortgage.  

Find Out Your Own Sum - Before applying on for a mortgage, make some time to calculate your credit worthiness. Look for your budget and how much you can afford to pay for Buying a home. You can use mortgage calculator and find out if you will be able to repay the monthly installments on mortgage or not. 

Better Stay in Same Job - Lenders provide mortgage to the borrowers who have a stable source of income and will be able to repay the loan without any difficulty. Therefore, if you are planning to apply for a mortgage then it is better to stay in your job and not change it at this point of time. 

Clear Debts - Before you submit your mortgage application, try and settle your debts and improve your income if you really want to succeed with your loan application. To be able to find the best deal on mortgage it is better that you do not have a lot of debt already in your account.

Proof of Income - You’re also likely to be asked for three months’ worth of bank statements and payslips for the same will help lender identify your financial position which will in turn help him /her know that you will pay back the home loan amount. 

Proof of Accounts for Self Employed - In case you are self employed your will be required to provide SA302 form relating to the last three years from HMRC or your full accounts for the last three years.

The Bigger the Deposit the Better the Deal - The more you will be able to save in your accounts, the more mortgage options will be available to you. Lender provide best rates to the borrowers with hefty sun ion your accounts. Also, borrowers with good account score are provided with lower monthly installments under a better deal.

Buy With Someone Else - If you think your don’t have good chances to be qualified for a good deal then your can always choose to buy it with a partner who have a better credit score.

Don’t Change Your Application - Once you’ve started your mortgage application, don’t mess around with it and start changing figures as it could hold up your property purchase or cause a delay.

Pay and Get Help - If you are confused or if you think that you are unable to make a good decision for yourself regarding getting yourself a mortgage then your may seek help from various mortgage advisers in the market.