Information Guide: Everything You Need to Know About Interests Rates

For some homebuyers, interest rates are the most confounding part of the mortgage loan process. So, instead of winging it, take a look at the information we’ve put together, a guide to what you need to know about interest rates.

What an Interest Rate Is

To make money on the loans lenders provide to borrowers, they charge interest. That interest is a percentage of the total amount of the loan and figured annually. The interest is part of your total amount due and your monthly loan payment.

How the Determine Mortgage Interest Rates

Several factors determine mortgage interest rates. The ones you can control include:

• Your credit score – the higher your score, the lower your interest rate.
• Your debt-to-income ratio – the more you owe in debt, the riskier you are as a borrower, and the higher your interest.
• Loan-to-value ratio – this is the loan amount compared to the total value of the home you’re purchasing. The more you can put down, the better your interest rate will be.

The factors you can’t control that impact interest rates include:

• The economy as a whole
• Inflation
• Job growth
• The housing market

Rates Vary from Lender to Lender

Each lender can raise and lower the interest rates they charge. They can increase rates for higher-risk clients or reduce them if business is slow and they want to bring in more loan applications. Shopping around for your mortgage lender is as important as shopping around for the right real estate agent and the right house.

When you’re shopping for a new home, you want all the right people in your corner. Contact the experienced lenders at Midland Mortgage Corporation for more information on their loan programs and the interest rates you qualify for.

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