For most people, buying a home is the largest transaction they’ll make in their lives. Saving up for a down payment helps to minimize the hit on your wallet, but you’ll also likely need a little financial help from a lender. Most lenders are willing to loan 80% or more of a home’s selling price, but they’ll charge you a specific amount of interest in return. Learning how mortgage rates work helps you plan to make an informed decision before you sign an agreement on a home loan.
What Factors Affect Mortgage Rates?
By now, you might’ve heard that mortgage rates are at a certain average point. In general, mortgage rates are influenced by factors that include inflation, supply, and demand, along with the Federal Reserve’s monetary policy. While these factors set up a general range that you can expect to see when you apply for a loan, your individual circumstances also play a role in the rate a lender offers. You’ll want to make sure you have a strong credit history and the ability to put down a bigger down payment to help you keep your interest rate on the lower side of the average range.
Fixed Vs. Adjustable Mortgage Rates
Lenders typically offer two main types of mortgage rates, and these are fixed or adjustable. Fixed mortgage rates in PA do not change. This means that you’ll pay the same rate for the life of the loan, which also means that your monthly payments should not change. People tend to choose this type of rate for its stability. Knowing exactly what you’ll need to pay each month makes it easier to budget, and you can avoid having a rate increase dramatically beyond your expectations.
An adjustable mortgage rate can change according to defined parameters. In some cases, this can work to your benefit, such as when it goes lower than what you started at. Or, you might be able to begin with a lower interest rate that might be more suitable if you plan to sell your house before there is an increase. However, it can also lead to your monthly payment going up if the rate increases. Some people opt for hybrid rates that start with a fixed one that can change after a set amount of time, such as a five-year mark.
Can You Shop Around for a Better Mortgage Rate?
For the most part, you’ll find that mortgage rates tend not to vary too much between different mortgage lenders in Philadelphia. However, you might find that one offers a better rate than another. Some lenders may temporarily offer higher rates during times of high demand to avoid being overwhelmed by too many borrowers. Or, you might find that a lender is willing to offer you a lower rate to earn your long-term business. Either way, it helps to use a mortgage calculator to see how much of a difference an interest rate change may make on your monthly payment before you choose one lender over another.
Get Your Mortgage Rate Consultation Today
Are you ready to finally begin working towards your dream of owning the most affordable home possible? We’ve got a team ready to help you secure a low rate that helps you keep monthly payments manageable. Reach out today for your free mortgage consultation to learn about your best options.