You might have heard that everyone is taking a mortgage to build a dream house. But, what is a mortgage? When people are about to purchase a loan without paying the amount right away, the loan is called a mortgage. As the property only secures the loan, the financial institution has the capability to sell the house when it goes on default. Now, buying a home is not a matter of joke and it requires attention. In this case, mortgage rate is a huge factor to deal with. The mortgage rate is the interest rate that the lender provides.
Now, the rate may be fixed or fluctuating depending on the credit profile. If the rate average goes up and down with the interest rate cycle, this will affect the homebuyer’s market. So, the rate is the chief consideration that every borrower must keep in mind. There are also factors such as interest taxes, collateral, insurance, and principal to be considered. It is easy to assume that the best mortgage rate is everyone’s principal concern right before buying. If you are wondering how to find the best mortgage rates in Houston, TX, read the article further.
- Understand how Mortgage Rate is Determined
At the time of issuing a mortgage, the lender always considers the risk of default on the loan. For this reason, the mortgage rate is the accumulation of different factors. So, a person might have to suffer from a high rate due to bringing high risk to his/her profile. When there is a high rate, the lender recovers the loan amount at a faster rate. In this way, the risk of default is narrowed down and the lender can protect the financial investment.
For this very reason, the credit score is one of the crucial factors leaving a huge dent on the mortgage rate. When the person has a decent financial history, it is an indicator of good credit score. Hence, the person will be able to repay the debts faster. It goes without saying that the lender will decrease the mortgage rate because the risk factor is low. The rate that will be charged ultimately is going to be the mortgage rate. Hence, the lowest mortgage rate is always the best mortgage rate.
- Credit Score is Linked to Rate
As you know by now, the FICO score is one of the important aspects of mortgage lending. This is an indicator of whether you are going to qualify for the loan or not. So, the best rate is available when the credit score is 760 or above. However, the credit score of 620 can assure 5.022% rate and the credit score of 760 can assure 3.433% of rate. It can be assumed that 10% of down payment is applicable when the borrower has 500 credit scores. If you manage to get FHA loan, there will be a 3.5% down payment against 580 credit scores.
So, you should focus on maintaining a stable income and employment for keeping credit score high over years. If you need any assistance regarding mortgage rate, seek help from loan providers.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.