Current mortgage interest rates, and how your purchase power is affected. The guide to rate success.
HT
Founder and CEO
Blog Author
Kaleidoscope of rates
Lender’s know what determines your rates, so why shouldn’t you? In today’s market, mortgage rates are more than just numbers- they can determine how much home you can afford and shape your entire home buying experience. As shifty as rates can be, it’s crucial to understand why and how these fluctuations impact your purchase power. Whether you’re a first time buyer or looking to expand your portfolio, staying informed about current mortgage trends may help more than just your wallet but the way you look at the market. We’ll break down how mortgage rates work and what they mean for your buying power in today’s competitive market.
To get the basics out of the way a mortgage interest rate is the percentage of interest charged on the home you purchase which can be paid throughout or at agreed times depending on the loan you choose and the term, as a monthly expense. The lower the rate the affordable the home. In general terms it’s the cost of borrowing money to obtain a home.
As of our research, in September of 2024 interest rates are ranging from 6.0-7.0%, but they are projected to decline within this year. By December rates should average 6.15%. With current rates in mind here are the factors that will affect your mortgage interest rate.
Affecting Factors
- Prepayment amount
The larger the downpayment the lower the rates. Depending on the final purchase price of the home, lenders will look at your down payment as a lower risk investment and you will have more willing offers. Our recommendation is to put down 20 or more if it’s affordable enough, you will thank yourself in the long run. The downside to not being able to put 20% down would be that some lenders require you to purchase (PMI) private mortgage insurance, due to the amount of risk they take if you have minimal credit, a co-signer, smaller than 20% down payment. When you purchase private mortgage insurance it adds to the overall monthly mortgage cost. The larger the downpayment the lower the rates you receive due to a shorter loan term.
- Credit score
Credit scores have become a trust backburner for decades, and it can either help or damage your potential purchase power in the housing market. The higher your credit score, the lower interest you receive compared to people with lower credit scores. Once lenders figure your credit score into your purchasing power they look at how reliable you are when it comes to loan payments. The more risk the lender takes, the less affordable your loan. Your credit score has the potential to prevent you from qualifying for better loan terms, so check frequently for credit errors when it comes time to purchase a property.
- Home of choice
The home is where the heart is if your wallet can handle it! In the real estate market it’s all about location, location, location! Location may alter the rates you receive due to differing rates throughout different states and counties. We recommend talking to multiple lenders when seeking a specific location and promptly asking about rates in that area.
- Loan term
The shorter the loan term, the lower the interest rate, and general costs. The pitfall to this is that the payments will be higher due to the fact you’re paying for a loan faster than usual, but this can all depend. Research different loans, the length of the loan, and the potential rates you may receive.
- Interest rate type
There are two foundational interest rate types: fixed and adjustable.
Fixed interest rates stay at the same rate throughout the loan term, compared to adjustable which have an initial fixed period rate then go up or down based on the current market. We don’t recommend picking one over the other because these are based on what works for you better.
So there you have it! The factors that initially change or affect your potential purchase power in the real estate market are right at your fingertips! Remember to invest in knowledge for success!
