A house is probably the most expensive investment that most people could get. However, before a person can fully settle in, they have to pay for it first. There are two ways to do this: first is to pay it out of your own pocket or get a mortgage. Since the former is nearly impossible, most people go for the latter option.

Getting a mortgage is pretty easy. However, some factors determine the rates for the mortgage itself. If you’re applying for a mortgage, you need to know what these are.

In this article, we list down some factors that can affect mortgage rates. Read on below to get started.

#1 – Your Credit Score

A credit score indicates how well you’re handling your debt. When applying for a mortgage, you need to have a high credit score because most lenders will look into your history as a debtor to see if you can pay them back.

If you’ve been banned from receiving credit, you might have difficulty getting a loan. If you have a bad credit score and your application is denied, you have to use other means to pay for your house.

#2 – The Size of your Down Payment

Most lenders require the person to have a down payment. The more money you put as a down payment, the faster you can get your loan approved.

However, the amount required differs based on the type of loan. Usually, people who have a good credit score get a loan with a minimum down payment. However, if your credit score is not as good as it is supposed to be, you might need to pay a higher down payment.

#3 – Your Debts

Student loans, credit card debts, and outstanding utility bills can affect your chances of getting a mortgage. This is because the lender might think that you will not handle your bills and will not pay for your mortgage in the long run.

However, there are specific loan programs that are designed to help people who are having financial problems. In this case, the lender might request a set of your bills to see how much you still need to pay.

#4 – The Loan Term

The loan term is the length of time you should pay off your mortgage. There are two types of loan terms: 15- or 30-year mortgage.

Usually, the shorter the term, the higher your mortgage rates. Usually, people with lower credit scores get a 15-year mortgage. However, if you manage to get a loan with a lower interest rate, you might be able to save a lot of money in the long run.

#5 – The Repayment Term

The length of time you take to repay your loan depends on the type of mortgage you need. Many people think that taking a mortgage with a long repayment term is reasonable. However, this is not true because loans with long repayment terms usually have higher interest rates. This simply means that you end up paying more for your loan.

If you’re planning to pay off your mortgage in a shorter term, you can do this by paying more down payment in the first place. This way, you can also enjoy a lower interest rate.

#6 – Economic Conditions

The government’s policies will ultimately affect the interest rates for a mortgage. For example, if the government decides to run a contractionary monetary policy, interest rates will also increase. In contrast, if the government decides to raise interest rates to stimulate demand, the interest rates will decrease.

Thus, you will not only have to pay attention to the economic conditions, but you should also be aware of the policies set by the government.

#7 – The Lender Itself

How a particular lender handles a mortgage application also affects the interest rates for mortgages. If you’re applying for a mortgage from a specific lender, you need to find out whether or not it gives lower interest rates for mortgages.

Also, you should be aware of lenders who might try to trick you into paying higher interest rates. Ensure that you get a mortgage from a reputable lender and keep your eyes wide open during the application process.

Conclusion

A mortgage is always expensive, no matter how you look at it. You should always conduct your research before applying for a mortgage to ensure you make the most of it. By knowing the factors that affect mortgage rates, you will make the right decisions when applying for a home loan.

If you’re looking for the best mortgage lenders, look no further than Waymaker Mortgage! We help our clients make informed decisions in buying their homes and closing deals faster, and you could be the next. Contact us today for a consultation!