What Affects Mortgage Rates?

Economical Influences on Mortgage Rates

One of the biggest influences on what affects mortgage rates will be is the economy. Right now we are in what is considered to be an unstable economy. With that being said, people are finding it increasingly difficult to purchase a home. Due to it being more difficult to purchase a home, less people are doing so and the economy shows. The home value in general is dropping, which leads to a lower interest rate as an attempt to create a purchasing stir. The more properties are owned or purchased, the higher the influence of stability it has on the economy.

Affects a Credit Score has on Mortgage Rates

Another area that largely affects mortgage rates is the potential buyer’s credit score and history. It is recommended for an individual to have a clear credit history for at least two years showing no late payments and job stability. Debt to income ratio is looked at for determining a purchaser’s limit but has little influence on a mortgage rate. If you have a strong credit history, a lender will view you as more dependable and will potentially give you a better rate. It is important to consider lowering or eliminating your debts before purchasing a new home.

The Type of Loan You Choose

The length of the mortgage loan you are interested in has a great affect on mortgage rates as well. Typically there are two fixed periods for a loan; fifteen and thirty year loans. A fifteen year loan typically has a lower interest rate because it is going to be a higher payment each month resulting in the bank achieving nearly the same amount of money in interested as a thirty year loan, in a shorter amount of time.

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