Your Mortgage Rate: What Influences It? Most, if not all will agree that mortgage rate is the
key factor mortgage borrowers look into before availing themselves of
mortgages. Mortgage rate is defined as "the standard interest rate
given by mortgage lenders" and "the rate of interest paid on
the mortgage loan expressed as a percentage".
It has been noted that the rise and fall of bonds and Treasury notes has a direct relationship with interest rates that include mortgage rates. Knowing this relationship can help a borrower determine if getting a mortgage in a certain period of time is feasible for him financially. It will also help him get lower mortgage rate and help him save some costs. Aside from all these, when one wants to obtain a mortgage, one must also understand that several factors affect the mortgage rate one will have from his loan. These factors that affect mortgage rate are: a. Amount of loan. If the amount of loan exceeds the loan limits created by Freddie Mac and Fannie May for conforming loans, the mortgage rate increases. b. The length of the loan. Shorter loans will mean a lower mortgage rate but higher monthly payments. Nevertheless, having shorter loans will assure you that you will be able to keep thousands of dollars later. c. Down payment - A higher nonpayment greater than 20% - will give the borrower the best possible mortgage rate. Higher mortgage rate is applied to down payments of 5% or less
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