If you live in Atlanta and are looking to apply for a mortgage, there are many things you need to consider to ensure you get the best Atlanta mortgage rates. Mortgage rates are always shifting and can even change two or three times in one day. With that being said, it’s essential to understand what mortgage rates are, how they are determined, and where to look for the best deals.
What’s a Mortgage Rate?
The interest charged on a homeowner’s loan is what’s known as a mortgage rate. These rates are generally determined by lenders and are either variable (meaning they fluctuate following benchmark interest rates) or fixed (they remain constant throughout the mortgage). It is worth noting that they vary depending on how good the borrower’s credit profile is and fall and rise with interest rate cycles.
Mortgage rates are a primary consideration for people looking for money to finance a home’s purchase using a mortgage loan. Other aspects involved include taxes, interest, insurance, collateral, and principal. Mortgage collateral is the house itself, while the principal is the loan’s initial amount. Insurance and taxes vary according to the property’s location and usually are estimates until it is time to purchase the property.
Mortgage Rate Indicators
There are several indicators that people looking to buy a home can follow when considering a mortgage. And one such indicator is the prime rate. Prime rates represent the lowest average rate lenders can offer as credit. Lenders such as banking institutions use these rates for interbank loaning and can also provide them to the highest credit quality borrowers.
The 10-year treasury bond yield is another indicator that borrowers use. This indicator is also used to show market trends. In most cases, when treasury bonds rise, mortgage rates rise too. While most homeowner’s loans are calculated based on a thirty-year timeframe, most loans are either refinanced for newer rates or fully paid off after ten years. This is why the ten-year treasury bond yield is considered one of the best standards to judge.
How Are Mortgage Rates Determined?
If you are like most people with a dream to own a home, chances are you looking to get the lowest rates available for a mortgage loan. However, like most people, you do not know how mortgage interest rates are determined. Understanding the different factors used to determine your homeowner’s loan interest rate can help you have an easier time negotiating your mortgage during the homebuying process. To make things easier for you, we will discuss critical factors that affect mortgage interest rates and how you can work around them to get the best interest rates.
• Credit Score
Your credit score plays a major role in determining the interest you will be required to pay on your mortgage. In most, if not all, cases, people with higher credit scores generally get offered lower interest rates than those with lower scores. Mortgage lenders consider credit scores to determine how reliable borrowers will be when paying back the loaned money. But why credit scores? Because they are calculated based on an individual’s credit report, which shows their credit history, including their credit cards, loans, and payment history. We Discuss more how your credit score affects your mortgage rate here
If you are thinking of getting a mortgage, start by checking your credit score – go through your credit reports to see if there are any errors. Errors in your credit report could lead to lower scores, something that could affect your ability to qualify for better Atlanta mortgage rates and terms.
• Loan Amount and Home Price
As a homebuyer, you could end up paying higher interest rates on a loan if you are not careful. While considering your options, please keep in mind that the loan amount you need to borrow for your mortgage is the price of the property plus closing costs – and that does not include your down payment for the property. Depending on your mortgage loan type or circumstances, your mortgage insurance and closing costs may also be included in the loan.
If you have already started checking out available properties in the market, you probably will have an idea of what the home you are hoping to buy costs. But if you are just starting, consider visiting local real estate websites to get an idea of what homes within your preferred neighborhood cost. Consider using an interest rates calculator or tool to see how different home prices and required down payments affect interest rates in a specific area.
• Down Payment
In most cases, the larger your down payment, the lower the interest rate will be. When you have a larger stake in the home, lenders have a lesser risk of dealing with and are more willing to charge a lower rate. If you can comfortably put 20% or more down as down payment, go right ahead – doing so will help you get a relatively lower rate.
However, if you can’t, most lenders will require that you get mortgage insurance, which protects them from loss if you are unable to pay the loan. It’s worth noting that mortgage insurance effectively increases the overall amount you pay per month.
When seeking a mortgage, consider the overall cost of the loan you get. When you put down a larger down payment, you effectively lower the amount you need to borrow. In most cases, the lower the amount borrowed, the lower the interest rate will be. Getting lower interest rates will save you more money over time. This is why it’s essential that you not only consider the interest rate but also how much you borrow – and a larger down payment can help lower the amount borrowed and the interest rate charged.
• Interest Rate Type
There are basically two types of interest rates: adjustable and fixed. Some adjustable rates have an initial fixed period that, after some time, goes up or down depending on the market. Fixed rates, on the other hand, remain constant. When it comes to adjustable-rate loans, it’s worth noting that the interest rate may initially be lower than that of a fixed-rate loan but might increase considerably later on, which is why you need to consider different Atlanta mortgage rates before making a decision.
• Type of Loan
It’s worth noting that mortgage loans in America are available in various, and rather broad categories such as VA, USDA, FHA, and conventional loans. It’s worth noting that each loan type has different eligibility requirements, and it is the lenders who decide which products they will offer. Comparing what different lenders have to offer will help you better understand all available options and should make it easier for you to pick something that suits you.
The Tradeoff Between Interest Rates and Points
When shopping for a mortgage, you will see that different lenders offer different mortgage rates with different points. Generally, lender credits and points allow you to make tradeoffs in how you’ll pay for your closing costs and mortgage.
- Points, or discount points, basically lower your rate, but there is a catch – you have to pay an upfront fee. When you pay points, you give the lender more upfront, and in return, you receive a lower interest rate, which means you get to pay a lesser amount over time. Discount points are great for people who know they’ll keep the loan running for a long time.
- Lender credits may lower closing costs but increase interest rates. With lender credits, your lender offsets your closing costs, and you pay a considerably higher interest rate. Even though you will pay less upfront, you end up paying more over time due to the interest rate.
You have three options to choose from when it comes to lender credits and points:
- You can opt to get lender credits and use the money to cover a portion of the closing cost but pay higher interest rates over time.
- You can opt to pay the upfront fee at closing and receive lower interest rates.
- Or, you can decide that you do not want to receive lender credits or pay points at all.
As we conclude, it is worth keeping in mind that it is not just one of these factors, but a combination of them all, that determines what you will be charged as interest. By understanding the factors that affect mortgage rates in Atlanta, you should have an easier time shopping for a mortgage that offers you interest rates that suit your budget and situation. Finally, mortgage loans are some of the most complex and most expensive financial commitments anyone can ever assume – and it is alight to ask for help. If you find the process to be a bit complicated, consider reaching out to a real estate attorney or a trusted housing counselor and Atlanta Mortgage Broker for advice and guidance.
While some of these factors are out of your control, understanding how determined interest rates will ensure you stay informed when shopping for a mortgage. At the same time, you have a part to play as you seek to find the best mortgage rates in Atlanta. Here are a couple of things that we believe will help make the process easier for you.
- Follow daily financial broadcasts
- Frequent up-to-date Atlanta mortgage rates websites
- Read up-to-date finance blogs and finance news websites
- Use an online calculator
- Compare the information you are reading to get the right information