Interest Rates and How it Affects Your Monthly Mortgage Payment
Your monthly mortgage payment consists of 4 to 5 different components, depending on how much of a down payment is paid: Principal, Interest, Real Estate Taxes, Property Insurance, and Mortgage Insurance (MI or PMI; not required if putting at least 20% down or VA loans).
Lenders determine the best interest rate they can provide you by not only looking at your credit score, but the amount of down payment, length of the loan, and of course the loan program you may qualify for. Having a high credit score, making a more significant down payment (preferably 20%), a shorter loan term, and qualifying loan programs are a few things that can get you a lower interest rate. The higher the interest rate, the more money you will be paying in interest to the mortgage lender.
You can pay additional money at closing to reduce the interest rate, or some lenders offer lender credits that will assist with paying some of the closing costs, but this lender credit will increase the interest rate.
You want to get the lowest and best interest rate possible, but it is always good to know how much you would be paying at the different interest rates. Below is an example of various interest rates, assuming a $180,000 mortgage with 3% down payment with a conventional loan program (common for first time home buyers). Please keep in mind that this example does not include the monthly Mortgage Insurance (not required with VA loans, or putting at least 20% down).
Contact me TODAY if you’re in the market, or even considering purchasing a home! I can assist with helping you in not only locating the perfect home, but put you in contact with mortgage lenders. Don’t forget to download a copy of Spinway Homes’ Guide to Buying a Home.