Five Factors that Determine a Good Mortgage Rate

We all know that mortgage rates are about as low as they have ever been. There is some fluctuation in the average rates depending on the type of mortgage product you choose, but these historic lows may never be seen again. Unfortunately, not everybody will qualify for these historically low mortgage rates. Here are five main factors that determine your eligibility to qualify for these low interest rates so you know a little bit about what to expect when you sign up for a home loan with your bank or mortgage broker.

Amount of the Loan
These low mortgage rates are typically reserved for borrowers who are getting an average-sized loan for their home. But if you are planning to take out a massive loan to purchase your home, you probably won’t qualify for the low rates. You will probably have to take out what is called a “jumbo loan” if you are planning to buy a high-end home in a high-end neighborhood. These types of loans will have higher rates than the low averages that are making the news these days.

Credit Score
It is probably no surprise that your credit score is going to play a major role in the mortgage rate for which you are eligible. If you have a horrible credit score, you are certainly not going to qualify for the low mortgage rates. You can wait six months or a year and work on improving your credit score. However, the rates may not be as low as they are right now if you do that. It’s impossible to predict what the rates will do over time so either way, it could be a gamble.

Occupant or Investment
If you are planning to live in the home yourself, you are more likely to get interest rates closer to the current average. However, if you are purchasing the home as an investment property, you will not qualify for the “owner-occupant” rates. You will be paying a higher rate than you normally would since it is an investment rather than a primary residence.

Region of the Country
You might not know this, but your mortgage rate is going to partly depend on the part of the nation where you are purchasing the home. Some states have lower rates than others so you might not get the lowest rates you see in the news. On the other hand, you may be able to find even lower rates than the ones advertised if the state has lower averages than others.

Paying Points
It is possible to get a lower mortgage rate if you want to pay more money upfront. This is ideal for people who have bad credit and want to buy right now because they are simply putting more money towards the purchase of their home while bringing down their interest rate at the same time.