What should you know about Mortgage Interest Rates?

Do you keep checking the current home mortgage loan rates as you are planning a buy your first home?

Mortgage rates fluctuate frequently, and especially when they go upward, home buyers may end up paying higher for their property.

The Factors that affect the rates

There are several factors that influence mortgage rates, and eventually how much home buyers will be paying. Assessing the financial market, financial or mortgage experts forecast about the future rates. For example, experts anticipate that there will be an increase in average mortgage rates towards the end of 2014. It is anticipated that the mortgage rates may go up to between 5 percent and 5.5 percent.

As a potential homebuyer you needn’t panic hearing these forecasts as the market trends don’t always follow a predictable path, and can change significantly.

The primary reason for changing mortgage rates is the actions that the Federal Reserve takes based on the current economy. Any increase in the rate affects the monthly payment of the borrowers. Considering the rate fluctuations in the past, mortgage rates over five percent are still considered on the lower side. Prior to the Federal Reserve’s program, the interest rates hardly dropped below six percent.

Homebuyers and sellers these days usually consider five percent interest rate as the threshold, and tend to make financial adjustments accordingly.

Interest Rates and Buyers’ Affordability

If you have enough cash to afford higher monthly payments on a mortgage, then increasing rates should not prevent you from buying a home. But if your budget is limited, higher rates are likely to affect the money you are going to pay on a monthly basis.

When taking out a mortgage loan, buyer’s affordability needs to be considered seriously. If you consult with a lender that is well-versed with the regulations and various loan options, then they can help you understand which loan (FHA, VA, USDA or traditional) may suit you. The lender will also make you understand the importance of debt-to-income ratio in order to qualify for a loan.

Things that you need to consider when looking for a loan

Try to buy a home before the mortgage rates go up.

For example, in Texas, the local government has enforced a regulation in terms of how much home buyers can borrow. Having these details in advance will help you chalk out a plan before applying for a loan.

It would be ideal if you consult with your chosen lender in details about the best loan options available for you considering your credit history and current financial situation.


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