Is Low Mortgage Interest Rate The Only Factor To Consider?

Being first time home buyer, it’s always difficult to pick the lender who offers the lowest interest rate. The interest rate on your mortgage will affect both your short-term and long-term financial situation, so making a sound decision that helps you determining your monthly mortgage payment is very important.

Although low interest rate is your priority, but why it’s not always the only concern? It’s because your mortgage is dependent on many other factors.  So, research well before making a decision. Here goes the list that may help you making a good decision.

1. Teaser Rates:  attractively low advertised interest rates are often just a way to get you in the door. The truth about mortgage rates is that they change multiple times a day.
2. Fees: many costs associated with taking out a mortgage besides the interest rate, like closing costs. Just as the grocery store tries to get you in the door by advertising a gallon of milk for $2 but then wants to charge you $5 for the cereal to pour it on, a bank might advertise a lower interest rate than its competitors but then expect you to pay double the closing costs you might pay elsewhere.
3. Type of Loan: type of loan you qualify for will affect your interest rate. That great mortgage rate that you see advertised might be for a 15-year fixed conventional mortgage, but your income and savings might only qualify you for a 30-year fixed FHA mortgage, which will have a higher interest rate and a higher long-term cost.
4. Location: the first question any lender will ask you is the zip code where you plan to purchase property. The national average might be 5.41% on a 30-year fixed, but the average rate in New York City might be 5.49% while the average rate in San Francisco might be 5.33%. So, look into it too.
5. Credit Score: The best advertised rates only go to borrowers with the best credit scores. Your credit score, if not observed as good in the past, might cause you have higher interest rates.

So you must know that mortgage rates vary and change multiple times within a day even. Depending on your geographic location, the type of loan you want and your credit score, they further vary. A mortgage lender might advertise a great rate, but charge you double money in closing costs. So, best way will be to look at the whole loan package, not just the interest rate.

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