3 Reasons Your Mortgage Rates are Higher than You Expected
by Dan Wolf
on Tuesday, September 9th, 2014 at 5:34am.
If you have recently applied for a mortgage, and suffered from sticker shock after yougot your quote, you're not alone. For the average homebuyer, knowing every detail about what drives up mortgage costs isn't necessary when applying, but it helps to know some. Because knowing what additional factors are driving up your costs, and how to curb them, can means thousands of dollars of savings placed securely back in your wallet. Here are just 3:
Credit Score While many brokers and lenders don't rely solely on a credit scores when deciding mortgage amounts, there is a number threshold that dictates: 740. The fine print often doesn't tell you that anything below 740 can increase interest. This plays a factor after mortgage rates are calculated.
Equity In real estate, equity is defined as such:
the difference between the current market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage.
So, just like with credit scores, homebuyers who have less than 25% equity (especially when combined with a low credit score) may see a rather steep increase in their mortgage rate. This is especially apt with traditional loans.
Loan Amount Depending on your loan size, the larger lenders (think Freddie Mac and Sallie Mae) want larger loans. The amount most often quoted is $200k. Why? Because even if you have perfect credit and 25% equity, for a loan that is less than $200k, they won't make as much interest (no real ROI for their troubles). That's not to say you should look for a home that costs more, or try to demand more money, just that, for them, at the end of the day, it's all about dollars.
The bottom line is to not get taken for a ride. Seek out mortgage professionals that want to help you, and can see through the dollar signs. In the end, the extra work will pay off in more ways than one.
For additional information on how we can help you, please don't hesitate to contact us at any time.