Today we’re going to talk about why getting the lowest interest rate doesn’t always equate to having the lowest monthly payment.
A lot of times, the first question out of a homebuyer’s mouth is, “What’s your lowest interest rate?” My initial response is that every loan program has different guidelines and requirements, so the lowest interest rate may not be the interest rate or loan program that you qualify for. I can’t really just shoot off a number, and if I do, it doesn’t do any of us good.
For example, the interest rate on a 15-year mortgage is going to be much lower than the interest rate on a 30-year mortgage. At the same time, if the rate is lower, but the term is shorter, the monthly payment is going to be higher.
Another thing that we look at is lender-paid mortgage insurance versus buyer-paid mortgage insurance. When a buyer pays their mortgage insurance, the interest rate will be a lower, but the payment will be a little bit higher.
With lender-paid mortgage insurance, you pay a higher interest rate, but your payments are a little bit lower each month.
If you have any questions for us or you or anyone you know is curious about what kind of loan programs that you will qualify for, don’t hesitate to give us a call or send us an email. We look forward to hearing from you soon.