Mortgage loan interest rates work in your favor if you are able to lower your risk to the lender. This article will give you the basic knowledge of how mortgage loan interest rates work and how you can improve upon them.
Interest rates are the reflection of the risk a lender is willing to lend their money to you. Any risks associated with the loans tend to increase the interest rate, and from many years of data gathered from loan defaults, they create what they deem risk factors and adjust the interest rate accordingly.
Some criteria affect interest rates:
- Loan to value(refer to leverage)
- Credit Score
- Loan Amount
Why do I have a higher interest rate?
Remember that interest rates are continuously changing, and sometimes the market could be the reason why rates are high. Lenders loan their money at higher interest rates to make up for a possible chance of default. The better borrower you are, the better the rate.
Tips on improving interest rate
Higher FICO scores, lower loan to value (more down payment for purchase; more equity for when you are refinancing), having reserves, and various other compensating factors. Remember, the idea is to keep the lender’s risk to a minimum.
Can I pay to lower my interest rate?
The common phrases you hear “pay points” or “buying down the rate.” Quite often than not, paying points is a smart idea.
A loan for $300,000 at 4%, and if you pay 1 point, the rate turns into 3.5%. Let’s say you have plans to refinance or sell within five years.
Monthly payment: $1,432.25 at 4%; $1,347.13 at 3.5%
Monthly Savings: $85.12
Five-year savings: $5,107.20
*Multiply your monthly saving by how long you plan on keeping the house for or plans to refinance if the savings are higher its this may be a good option.*
Always keep in mind that every lender is different, and every loan is different; some lenders are more tolerant of risk factors, therefore choosing the right lender is vital in your loan journey. A mortgage broker takes the guesswork out of it, and being upfront with your loan officer allows them to select a lender with the lowest rate in their repertoire who’s underwriting guidelines fit your particular needs.
Valor Lending Group also offers literally every loan in the book! Please do not hesitate to call on me for any scenarios. I look forward to an opportunity to demonstrate my prompt and professional service.
Recap of our Loan Products:
- Hard Money Loans (minimal documentation) Typically Fund in 7-10 days.
- Stated Income Loans (Great for business owners and self-employed) No tax returns!
- 100% financing is available (we can cross collateralize other properties if there is enough equity)
- Valor VA Home Loan 100% financing up to $1.5MM
- Rental Property Loan – No tax returns or DTI calculation! Based on subject property cash flow – No DSCR Coverage needed!
- Flipper & Rehab Loans (Flip a property with one of our many options)
- 2nd Position Loans up to $5mm
- Raw Land & Lot Loans
- Ground-up Construction for spec homes, custom homes, and commercial ground up.
- Farms, Vineyards, Ranches and Agricultural Properties (25-30% down)
- 5% down Jumbo’s with NO MI up to $2mm / 10% down up to $3mm (Temporarily on hold)
- Manufactured Housing / Mobile Homes (20% down / 600+ credit score)
- Acreage Properties
- Commercial Loans up to $500mm
- 3% & 5% down Conventional Loans– LPMI (Lender paid mortgage insurance)
- Foreign Nationals Loans (no social security or residency required)
We also offer:
- Conventional Conforming Loans (under $510,400)
- High Balance Conforming (from $510,400-$765,600)
- Jumbo Loan Financing to $10 Million / Super low rates! / 10% down Jumbo to $3mm
- FHA, USDA
- Reverse mortgages up to $1 Million Value
- Cash-Out Refinancing
**Rates and terms subject to change without notice