“The affordability of a home is based on the monthly payment, which is driven by the interest rate and the amount that you borrow,” says Dustin A. Wells, senior vice president and division manager with IBC Mortgage in Austin, Texas.
Talk with any loan professional, who have better idea regarding local market of housing to let you know with best interest rates of home loan. If you interested in owning a house, you are lucky because you can mortgage rates at a reasonable level which range from almost 3% to 4%. Interest rate is basically the percentage amount that you give to the lender to get the borrowed money for owning a particular house, so low interest rate means great affordability for the house.
Dustin A, a division manager and vice president with mortgage of IBC in Austin says, “The affordability of a home is based on the monthly payment, which is driven by the interest rate and the amount that you borrow,”
Ways to determine interest rate:
Even with such reasonable rates certain factors can raise or lower your interest rate which in turn effects how much home cost you can afford.
Although interest rates remain reasonable but there are some factors which becomes cause to change the interest rate either positive or negative shift and affect the power for owning the home. One of among most major factors that can create an impact is credit scores. If you are suffering from negative credit scores like missed or late payment, than it means increase in interest rate, even if you are managing your finance well. Second factor is “loan to value ratio”. Here, percentage regarding your value of property is find out, which is going to be mortgaged. Loans types also affect interest rates.
Well says, “As you’re shopping around and trying to find the best or most aggressive rate, you’ll see the rates change depending on the financing vehicle you’re choosing,” Government provides guarantee by sharing risk with the lender. Wells said that rates of conventional loans are moved by your credit scores. Fixed loan rates are prevailing more and more aggressive as compared with ARM (Adjustable loan rates).
“What we’ve seen in the last three to four years has really been a transition to fixed-rate mortgages,” said by Wells. “You don’t see the advantage now with the ARM loans that you saw before the economic downtown.”
“In the fine print, it’s going to indicate that you’ll have to pay points — an out-of-pocket cost associated with obtaining that rate — or it may advertise a rate for a product such as a 1-year ARM or a 10-year term,” wells further says. Searching for some information regarding home loan is good but total dependence on that is not so good.
“I think both of those are fine, but they’re not a replacement for sitting down one-on-one with a loan professional,” he argue by adding that having an interaction with someone who have better idea among housing market locally is very important.
Wells said that ask several questions with loan professional like loan process, duration required to complete the loan process, policy for locking interest rate, handling of closing , attending to closing, cost required for process and loan closing etc.
Maintaining good relation with that professional is good for various situations especially for locking rate and for the duration to lack.
Well says, “Part of their job is to be monitoring and managing that process for you. If they see the market rates get very aggressive and improve, they should be proactively contacting you that it would be a good time to lock in your rate,”