What Factors Determine Your Mortgage Rate?

Even the savviest of mortgage shoppers can be at a loss when asked what determines the interest rate they will pay on their mortgage. Here are 8 factors that can affect your mortgage rate:

  1. Credit Score Lenders use your FICO credit scores to predict how reliable you will be when repaying your mortgage loan. Generally, the higher your credit score, the lower your rate. One of the first steps in house hunting is to get prequalified and have your credit pulled. After you have reviewed your credit report, if it needs correction or repair, I can refer you to experts who can assist you.
  2. Property Type Are you buying a single-family home? A condo? A multi-unit property? Will the property be used for primary, secondary, investment or commercial use? All those factors will affect your rate
  3. Down Payment Generally the higher the down payment the lower the interest rate. If you are putting less than 20% as down payment you may be required to obtain private mortgage insurance.
  4. Loan Term the shorter term loans ( ie 15 years) have lower rates than longer term loans ( ie 30 years) The important thing to consider is that even though the shorter term loans have a lower rate, the monthly payment will be much higher since the loan is paid off in a shorter amount of time. So, in our discussions we will weigh the pros and cons of rate vs payment vs loan term
  5. Interest Rate Type Fixed rate interest rate loans have the same rate and payment for the life of the loan. Adjustable Rate Mortgages have a rate and payment for a fixed amount of time but adjusts at a set anniversary date. Even though the initial payment may be lower, if rates go up, so will the payment.
  6. Loan Type There are several types of loans depending on your needs: Conventional – conforming and jumbo, Government- FHA,VA and USDA, and Qualified and Non-Qualified Mortgages. All those loans have different parameters and eligibility requirements. Rates can be significantly different depending on your loan type
  7. Property Location Rates vary throughout the country depending on local trends
  8. Points These upfront fees that can lower your interest rate. You are basically “buying” a lower rate. By paying points you will pay less over time with the lower interest rate. We would determine if paying points works for you. It may be something to consider if you are planning on staying in the property for a long time.

It is not just one factor that determines your interest rate; it is actually a myriad of factors and I am here to help you navigate through the different options available.

Contact Anne Stulpin, NMLS #183943, at 610-574-0473 or via email at annes@pmadvisors.com.

All loans are subject to meeting all qualifications and guidelines. Professional Mortgage Advisors NMLS# 1752417

The Mortgage Process: Staying on Course

You’ve found your dream home and now it is time for the financing. We can work together to make sure your experience goes as smoothly as possible. Below are several tips to help you avoid some of the common pitfalls that could slow (or potentially halt) the mortgage process.

What to do before loan application

● Before you look at homes, get a copy of your credit report to determine if there are potential issues that can be addressed upfront or corrected if necessary.

● Be prepared to explain any employment gaps and provide a full two-year employment history, including names, addresses and phone numbers of prior employers.

● Be prepared to provide most current pay stub and two years of w-2s salaried or have hourly wages.

● if you have any other sources if income (self-employed, rental income, etc) you will need two years of tax returns with all schedules

● Complete documentation is critical. You will be asked to submit bank statements for the prior two months with all pages. It’s important to provide all numbered pages of the statement, including all blank pages.

● Verifying escrow is included in the payment should be provided. These expenses will be considered when determining qualification for the new financing.

What to avoid after loan application

● After you apply for a loan, avoid doing anything that would negatively impact your credit score. This can include opening a new credit card or charging large amounts. Even after an initial loan approval, a credit refresh may be puled before closing to ensure the credit profile still qualifies.

● Unless instructed by the lender, you should avoid making large payoffs of debt once your credit has been pulled. This action doesn’t typically help loan qualification and could delay the processing and approval of the loan.

● Avoid switching banks or moving money between accounts. When you move money around, all deposits/transfer must be sourced which results in a need for increased documentation.

● Unless necessary, do not change jobs while buying a home. This may slow down the approval process and potentially have a negative impact on a loan decision.

● Avoid cash deposits as they are not an acceptable source of funds when purchasing a home as there is no way to document properly where the cash came from.

● If large deposits are made, you may be asked to provide a satisfactory paper trail to document the source of the funds. The definition of “large” varies depending on the normal deposits that go into the account. Any outside deposits that are not regular payroll deposits may be subject to additional documentation.

● Avoid depleting assets (making major purchases, etc.). Lenders may request updated asset balances for closing and if the funds are not available, this may impact loan approval.

The mortgage financing process can often seem very complex and finding the right partner can help your clients navigate their way through is important. As your loan officer, you can count on me to be there for you – from the beginning of your application to a successful closing.

Contact Anne Stulpin, NMLS #183943, at 610-574-0473 or via email at annes@pmadvisors.com.

All loans are subject to meeting all qualifications and guidelines. Professional Mortgage Advisors NMLS# 1752417