If you are a current home owner, or are in the process of purchasing your first home, mortgage interest rates are important to you. While 30-year mortgages are the most common, you have the option of considering mortgages with shorter pay-back periods of 10, 15 or 20 years, among others. No matter what kind of loan you select though, mortgage interest rates will impact how long it takes to pay off your loan.
While cash buyers accounted for 43% of the home sales in March 2014, many buyers have no choice but to take out a loan. In the last couple of years, those who took out home loans overwhelmingly opted for the 30-year fixed-rate mortgage. In fact, this type of loan accounted for 85% of the home-purchase loan market in 2012 and 90% in the first half of 2013. A fixed-rate mortgage loan allows you predict and depend on the size of your payment.
Banking rates and regulations can vary from state to state, but mortgage interest rates are guided by the federal government’s prime lending rate. Fortunate home buyers are able to purchase their homes during favorable interest rate times. Unfortunate buyers sometimes find themselves purchasing a home when the mortgage rates are higher.
The most successful home buyers spend time thoughtfully planning before entering the housing market. In fact, many financial advisers advice having at least a 20% down payment before starting the home search process. A down payment of 20% or more could mean that you do not need to have mortgage insurance, saving you extra money every month.
Past credit history, of course, is also a determining factor in a home mortgage loan. For example, to obtain the lowest mortgage rate, a consumer must have a high credit score, 740 or higher, and a low loan-to-value. If your credit score is not where you want ot to be, the first step in home buying is to work to bring your score up. Did you know that your payment history is the single most important factor in determining your credit score. It accounts for 35% of your total credit score. Another factor in improving your credit score so that you can qualify for the best mortgage rates is to limit the amount of credit you use and the number of credit cards you apply for. If you want an optimal credit score result, aim to keep your credit card utilization to 10% or less. Also, limit or eliminate the number of new cards you apply for because how often you apply for new credit accounts for 10% of your score.
The best banks will advice you about the home buying process even before you visit your first open house. Look for a bank to be a resource for sound financial solutions. You want to work with a bank that has real people working with real clients. You also want an institution that will provide an exceptionally high level of service for each and every customer, no matter what their account balance is.