Earlier this month, we talked about
why it is never a good idea to work with an Internet lender or even a company
that is not local to you.
We pointed out the hazards and how
it’s actually better for the local economy when you keep your business dealings
local.
We also noted how many people look
for out of town businesses and use online lenders because of ‘specials’ and
‘guaranteed low rate.’
However, what we found was that no
company could actually guarantee you a rate without first going over your
financials, credit history, etc.
This blog post delves further into
interest rates for mortgages and how mortgage lenders determine interest rates.
Interest Rates Explained
In truth, a lender really can’t know
what your interest rate will be until they determine them through a
multiple-step process. It goes like this: if you walk into a lender and just
blatantly ask for the going rate, they cannot know the answer to that without
first getting a bit of information from you.
If they tell you otherwise or try to
guarantee you a low mortgage interest rate, then you can expect to be hit with
a number of various fees that don’t actually exist.
The information necessary to
determine your interest rates consists of a few personal things like finances,
credit score, and current job. For instance, the FICO score really has become
the deciding factor with mortgage interest rates.
What is a good FICO score?
Essentially, the higher the score, the better chance you have in getting
offered a low mortgage interest rate.
The FICO score may pay a large role
in the rate that you end up with, but there are other things to factor in. The
type of loan you get, for instance will affect your interest rate.
A jumbo loan, which is a home loan
for a house priced of or over $417,000, will raise your mortgage interest rate.
This is because the amount of the loan is larger as is the risk for the
mortgage company providing you with that loan.
Another variable that can greatly
affect your mortgage rate is the length of time you plan on having the loan.
The longer the loan, the higher the rate will be. This is because you are
taking a longer amount of time to pay back a large sum of money that the lender
essentially stuck their neck out for you over.
In all actuality, it is all about
determining the risk involved in providing you with a mortgage loan. Once the
risk has been determined and assessed, an interest rate can be determined for
you.
At Indigo Mortgage, we will always
work to get you the very best rate, but we will never guarantee the lowest rate
the minute you walk through the door.
Our philosophy is honesty and
integrity, and no one cares more about getting you the right loan – and
interest rate – as we do!
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