Driving Mortgage Rate
In our last post, we highlighted some of the factors that can affect your mortgage rate. Here we’ve added ten more to the mix that might surprise you.
As always, information is knowledge. At Golden Oak Lending, we want you to have all of the information so you can make the right decision for you and your family.
Here they are, ten factors that drive your mortgage:
- You need a longer lock period. Everyone would like a guaranteed low rate for as long of a time as possible, but if this is a requirement for you, it will affect your mortgage rate. Locking into a certain rate affords a certain level of assurance, however what if the rates lower rather than rise over time? It’s something to think about.
- You have multiple units. If your property is a three or four unit affair, that will drive your mortgage rate higher, especially if you’re renting them out. A duplex is usually okay, but more than two units can pose a problem.
- You don’t want out-of-pocket costs now. Nobody wants to pay those pesky closing costs. However, if you take lender credit, it will impact your mortgage rate. Keep in mind that although lender credit is attractive, in the end you’re paying for it.
- You opt for an interest-only deal. Some people like the idea that they can enjoy a lower monthly payment by choosing an interest-only arrangement. Again, there’s a downside: higher interest rate.
- You had difficulty qualifying. If you didn’t get pre-approved before you started shopping around for your loan, you may be at a disadvantage. Some lenders may penalize you for having to do a manual underwrite to approve your rate.
- Reduced doc. In some cases, you may have a higher mortgage rate because of your credit score and other factors. Something to keep in mind.
- Specific loan program hits. For example, USDA loans or FHA streamline can affect your rate as some lenders will charge pricing adjustments accordingly.
- Lender paid option. Let’s say you’ve got a scenario where the lender is paying the mortgage insurance on your behalf. That will affect you somehow later and typically this translates into a mortgage rate increase. So, you’re still paying for it. And you’re paying for it by way of the interest rate.
- If you choose to manage the payments yourself. Sure, this enables you to hold onto your money, but it probably will cost you more. If you don’t set up an escrow account and allow the lender to manage your property taxes and homeowners insurance, you’ll get hit for this.
- Is this a second mortgage? If so, then you can be considered riskier by lenders. Even if you use a different lender for each mortgage, this information will be known, and may translate into a higher rate on the first.