Getting a mortgage and buying a home makes for one of the largest purchases people commit to. Banks and lenders generally finance 80% of a home with the buyer agreeing to pay them back over time. This kind of loan is known as a mortgage and in Green Lake, WI, realtors recommend learning what mortgage rates are and how they work.
- How Mortgage Interest Rates are calculated
Several economic factors go into determining mortgage rates. Another factor is the secondary market. Investors can buy mortgage loans from Fannie Mae and Freddie Mac to turn a profit on them, which affects current mortgage rates. How much investors will pay for a mortgage can determine the rates lenders can offer them for
In general, a strong economy and stock market mean investors need higher rates to make a return on their investment. This leads to higher interest rates on mortgages from lenders.
- Individual Factors
The rates an individual receives can depend on their personal financial situation as much as outside factors. Things such as credit history, current credit score, income, debts, and other factors are considered when determining loan amounts and rates.
Lenders will assess how much of a credit risk you are by using factors such as your debts, income, cash reserves, and down payment. The greater a risk you present to the lender, the higher the interest rate.
- Choosing the Right Lender Makes all the Difference
Green Lake, WI realtors recommend shopping around for a good mortgage. Different lenders can set their own rates. Individual lenders have unique overhead and operating costs, meaning they have to charge different amounts to secure a profit.
Consider applying with different lenders or consulting a mortgage broker to get the best deal. Brokers have connections that let them get the best possible rates for their clients.
- How Mortgage Rates Can Affect House Prices
While mortgage rates won’t directly impact house prices, they do have an affect on supply and demand. Homeowners are less likely to sell their home when interest rates are high, which means there’s a smaller supply of properties. The reduced supply means more demand, which means higher prices. Low interest rates make people more comfortable with selling their property. It also means that people are more willing to take on a mortgage and buy a house.
The impact rates have can depend on how much rates increase or decrease. High rates can stifle demand, which would force sellers to reduce the asking price for their property.
- Pay Points to Reduce Interest Rates
If you still aren’t happy with your interest rate, you may be able to pay discount points and have the rate reduced. A discount point is basically a kind of prepaid interest on the mortgage. One point is equal to 1% of the total balance but paying it will reduce the interest rate for the entire mortgage. How much each point takes off your interest rate depends on the individual lender as well as the overall market.
Paying points to reduce a mortgage is known as “buying down your rate.” Measure how long it would take to get back the money you spent on points — known as the break-even point — to determine if paying points is worth it for you.
The team at Emmer Real Estate Group can provide assistance on understanding mortgage rates, and we are here to help you throughout the buying process. You can reach the team at 262.629.4747 or ContactUs(at)EmmerRealEstate(dotted)com.