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Helpful Insights on Mortgage Interest Rates
Whether you’re a first-time home buyer, trading up or ready to refinance, it makes sense to learn all you can about mortgage interest rates. After all, they’ll play a major role in determining your monthly mortgage payment. If you’re purchasing property, they could also affect how much home you can afford. And if you’re considering a mortgage refinance, they could help determine whether it’s a financially sound move to make. Here, you’ll find helpful answers to four commonly asked questions about this complex topic.
Q: How are mortgage interest rates determined?
: Mortgage interest rates are based on several factors, such as:
Q: Can I lock in my mortgage interest rate?
- Your credit score and credit history. Hint: Check your credit report annually for free at annualcreditreport.com.
- Supply and demand. Interest rates may be higher when demand for home loans is high, and vice versa.
- The health of the economy. Inflation, unemployment rates and the stock market are all market indicators that can impact interest rates.
- Your down payment amount. Paying more upfront may reduce the amount you’ll need to borrow and might help you qualify for a lower mortgage interest rate.
Depending on your lender, you may be able to lock in the current interest rate once you’ve signed a purchase agreement to buy a home. Many rate lock agreements keep your interest rate from changing during the lock period, usually from a few weeks up to 60 days. That can take a little stress out of your home buying experience and help you better plan your upcoming mortgage costs through the closing process.
Q: What are discount points and should I buy them?
Discount points are a type of prepaid interest on your mortgage. You typically pay for discount points at closing to lower the mortgage interest rate, which lowers your monthly mortgage payment. Each discount point costs approximately 1% of the loan and lowers the loan’s interest rate by about one-quarter of a percent.
Example: One point on a $300,000 mortgage at an interest rate of 3.5% would cost you $3,000 and lower your mortgage interest rate to 3.25%.
If you want to lower your monthly mortgage payment, paying discount points can help — and they may even be tax-deductible (consult your tax advisor). It’s a good idea to consider how long you’ll be in your house and how long it will take you to recover the cost of the discount points with your lower interest rate.
Q: What is a mortgage prequalification?
Mortgage prequalification is when your lender provides an estimate of how much you can afford to borrow. It can help you set a price range as you begin house hunting. It can also give you an advantage over other buyers by showing the seller that you’re serious about buying a home.
For information on specific loan products or for additional insights and advice on how rising rates might affect you,visit your nearest branch
or call (800) 862-1998.
Contents of this blog article are intended to provide you with a general understanding of the subject matter. However, it is not intended to provide legal, accounting, or other professional advice and should not be relied on as such. Information may have changed since the publication date. Equal Housing Opportunity