In recent times, mortgage rates have increased and the rise is expected to continue for quite some time. With no chance of the trend reversing anytime soon, what do you do if you are interested in buying a house?
Mortgage rates depend on a number of factors such as the property type, property occupancy and loan program. While you may not do much about these, there are some other factors that also influence mortgage rates, and about which, you can actually do quite a lot.
Consumer Profile and Property Characteristics
The costs of a mortgage are directly proportional to the risks associated with the loan. Should you default on the loan, the lenders will suffer and so they evaluate the risks, and charge accordingly. Lenders do consider market conditions for this, but they also consider your profile. Your credit score and debt ratio are all analyzed before you are offered any rates. Similarly, the property for which you want the mortgage is also studied and factors like property type and occupancy are considered.
The mortgage rates offered for single family are less than those given for multifamily housing like condos or townhomes. Your credit score also makes a significant contribution; generally, you can get the lowest possible rates if your score is 740 or more.
The economy of the real estate market changes daily, and every 24 hours, you can notice different market conditions. The rates are affected by the unemployment rate, to which they are indirectly related. This means that the lower the figures are, the higher will be the rate offered, and vice versa.
Along with this, every once in a while, the Federal Reserve holds a meeting related to the monetary policy. All their statements are highly influential for the mortgage rates.
As already mentioned, you cannot do much about the economy, but you should at least make sure that the day you sign up for the mortgage is the one on which the rates are somewhat lower than the past few days.
Conventional mortgages are non-government loans and are priced according to your credit score and loan-to-value. FHA loans consider other factors as well. For the former option, you must have a high credit score, but for the latter, even an average credit score will suffice. The down payment also need not be greater than 3.5%. As for the rates, they depend on your overall situation.