Home Buyers The Truth About Interest Rates
How Interest Rates Impact Your Future Home Purchase
Oh, interest rates. A term that can be both confusing and intriguing to both home buyers and sellers. When you are looking to buy a home, interest rates are a significant part of this process. They will have an impact on how much you are ultimately repaying for your house, so they should be taken seriously. But, don't feel overwhelmed. HomeHunt is here to help you gain some much-needed interest rate knowledge.
What are Interest Rates?
An interest rate is a percentage of the loan that is charged for borrowing money. Buyers want to secure a low-interest rate because the lower the rate, the lower the mortgage payment will be each month. It is important to look at interest rates when comparing lenders to see who will be saving you more money. Lenders must inform you of how the interest rate will affect your payments over the course of an entire year. This is known as the Annual Percentage Rate (APR) and will include all fees associated with the loan. Knowing the APR for different loans will make comparing rates and loan providers easier. The APR is different from the interest rate you are being charged on a loan and will always be higher.
It is required by law for the lender to inform you of the APR. If you are confused about APR, our team at HomeHunt can guide you through the process of comparing loans. It is also important to understand that the interest rate that you may see advertised may not be the interest rate you receive. Rates will vary depending on the market, APR, and other fees involved in a mortgage loan. You will not know your rate until you are under contract on your home. Advertisements are generic and not specific to your situation.
Key Factors That Determine Your Interest Rate
- Credit Score - A credit score of 620 or higher should allow you to qualify for a mortgage, but some loans may allow for lower scores.
- Loan Amount - Depending on the price of the house you are buying, your loan may be small or large and will have an interest rate that reflects this number.
- Down Payment - The higher your down payment, the lower your loan and interest rate amount.
- Loan Type - There are many different types of loans to choose from. Read our Mortgage Terms and Loan Types blog for more information.
Before committing to a lender, do your research and only commit once you explore all options available to you. Here at HomeHunt, we know how important interest rates are to home buyers. Let our team help you find a professional lender who puts your best interests first.