Home Financing Rate – What You Pay Depends on More Than Just Your Credit Score
When you take into consideration the current mood of indecision and unpredictability of the real estate market, it can be difficult to assess the landscape for both new home loans and refinancing loans. If you are shopping for a loan and you do qualify, one of your main goals will be to procure the best home financing rate available. To do so, you’ll need to know what exactly what your rate implies to you as a borrower.
As you try to decipher what the different home financing interest rates boil down to, you might be overwhelmed with a mass of terms and numbers. Make sure that any loan rate quotes that are presented to you include the annual percentage rate or APR. Often the rate that is more prominently presented is not the APR, which is the actual rate that you will be paying if you pay the loan off, without any changes or refinancing, from start to finish.
What are included in the APR calculation are all the fees that are charged by the lender. These fees, calculated over the duration of the loan, add to the bottom-line interest rate. So if you are going to compare similar loans, make sure you compare the APR of each loan package to be able to determine what you are getting.
Home financing rates may be higher or lower based on the type of loan you get and the terms of the loan. A 30-year fixed rate loan, which is more or less the standard loan in the industry, means that your monthly payments will stay the same for a 30-year period, at the end of which your loan will be completely paid off.
Another common loan, the 15-year fixed rate loan, is basically a shortened version of the 30-year fixed rate loan. Payments will also be the same each month, but obviously higher so as to pay off the loan in 15 years instead of 30.
For people that are planning to stay in their current home for a limited amount of time, or are planning to refinance for whatever reason, may chose an ARM or adjustable rate mortgage. Home financing rates for these types of loans tend to be significantly less than the 15-year and 30-year fixed rate loans. But there is a reason why rates are lower – increased risk.
Take the example of a 3/1 interest-only ARM. This is a loan that allows the borrower to pay a fixed amount which covers only the interest for the initial three years, after which the rate is adjustable and subject to market rates at the time of expiration of the initial period. Adjustable rate mortgage loans are thought to be somewhat riskier than other more traditional loans and are normally recommended when the borrower is fairly certain that he will not keep that loan on the books for very long.
You can pour through nearly endless amounts of loan products. You should really decide on the type of loan that makes the most sense for you before making any kind of in-depth comparison. Take a little time to gather information and then get the loan that fits your profile.