Today we’ll answer a few important questions from the world of interest rates.
Where are interest rates and where are they going?
Rates are way down compared to where they were at the end of 2018 and the beginning of 2019. We’ve been in a decreasing interest rate environment ever since that time, and it appears that rates will decline further or stay flat at least until the election.
What goes into calculating interest rates?
This is a simple question, but unfortunately, there’s no simple answer. Lenders have to take into account your income, credit score, debt-to-income ratio, the property’s location and type, etc. Rates are very dependent on each specific buyer and the home they intend to purchase, so it’s hard to give you an interest rate without knowing what you’re buying and who you are.
What does it mean for a typical buyer to get the “best” rate?
Our industry is very regulated, and loan officers don’t make money off of interest rates. We only make money on loan amounts. It’s always in our best interest to provide the best rate possible for our clients the day they’re under contract or ready to refinance.
One thing to keep in mind, though, is that the lowest interest rate very rarely guarantees the lowest payment. This is because the lowest rates usually come with shorter-term loans (a 10- or 15-year mortgage as opposed to a 25- or 30-year one). Since you’re shortening the term quite a bit, your payment will be higher. So ask yourself before getting a loan: Will getting a really low interest rate truly help meet your family’s financing goals? Government loan programs come with lower rates, and their credit score price adjustments aren’t as stringent, but they also come with private mortgage insurance for the life of the loan.
The most important thing to remember when meeting with a financial advisor is that you’re meeting all of your financial goals. Is your down payment where you need it to be? How about your monthly payments? Are you comfortable with everything that goes into your mortgage?
If you have other questions regarding interest rates, how they’re calculated, or which loan program suits you best, don’t hesitate to reach out to us. We’d love to help you.