There are a few key factors that determine your mortgage interest rate. It’s important to know what they are because, for better or for worse, your habits affect how much you will pay. Being aware of this information will also provide you with a better understanding of the process by which a lender comes to its decision. Furthermore, it will also equip you with the knowledge you need in order to ask any lenders you’re considering the right questions before you move forward with securing a mortgage loan.
Know Your Credit Profile
Your “credit profile” — which consists of your credit report, credit score, credit history, debt, savings, total assets, and current income — is important to your lender. This is the information that allows them to evaluate how well you manage financial responsibilities, which plays a major role in influencing the decision to approve your loan, and if so, the terms (e.g., the interest rate).
Generally speaking, the higher your credit score, the lower your loan interest rate, and vice versa. When it comes to borrowing money for a home purchase, having poor credit will play a role in the loan amount you are approved for, and could potentially contribute to not being approved for a mortgage at all. Knowing your credit standing will help prepare you and set your expectations for what’s to come.
A couple of things you can do to ensure better credit standing include paying all your bills on time and paying more than the minimum on any outstanding balances you have whenever possible.
One thing you might not naturally think to do, but should, is to make sure your credit report is accurate. You might be wondering, “Why wouldn’t it be?” It’s a good question. A Federal Trade Commission study of the U.S. credit reporting industry found that five percent of consumers had errors on one of their three major credit reports that could result in less favorable terms for loans. So, there’s your answer! The good news is that you should not have any trouble obtaining copies of your credit report. The Fair Credit Reporting Act requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.
Know Your Investment
To determine the amount you’ll need to borrow for your mortgage loan, deduct your down payment from the price of the home. As a general rule, the more money you put down, the lower the loan interest rate. This is because when a lender sees a borrower make a larger up-front investment, that person has a bigger stake in it and is, therefore, viewed as being lower risk. The “magic number” is 20 percent; if you can put down that or more, it is likely that you’ll get a more favorable interest rate.
One way to get an idea of the price range of the home you hope to buy is to look on real estate websites like Zillow and, for Northern New Jersey real estate, GSMLS. This research will give you a sense of typical prices in the neighborhoods you’re interested in. With this information, you can prepare yourself for what your short-term and long-term home-buying investment options are.
Know Your Bank
Choosing a bank for a mortgage can simply be a personal preference, but it can sometimes also be the best financial option for a borrower. While banks and mortgage companies typically offer similar interest rates, banks may offer additional, unique advantages. For example, along with competitive rates, banks also have financial services such as checking and savings accounts, IRAs, money market accounts, a range of loan offerings, and much more. Utilizing these products and services can pay dividends. Often times, because a borrower’s bank of choice already has a good deal of information about them (e.g., account balances), qualifying can be easier, faster, and more convenient. Many people are also comfortable and familiar with their own bank’s staff — especially at a smaller, community bank.
NVE is headquartered in Englewood with 12 branches throughout Northern New Jersey, so unlike a big bank, all our decision makers are located across town, not across the country. That means our customers have access to people who can give them answers quickly, efficiently, and most importantly, with a Bergen County point of view. The confidence and peace of mind that can instill in a home buyer can be invaluable during what can be a stressful time.
In closing (no pun intended), interest is a very important factor to consider during the borrowing process, but it isn’t the only one! Points, mortgage insurance, and closing costs are also valuable discussion points. Having a trusted partner to walk you through all of these aspects can really put you at ease during the life-changing experience of buying a home at any stage. That’s why NVE Bank’s Mortgage Specialist works closely with customers every step of the way to ensure a smooth process and speedy closing, so buying your dream home doesn’t become a nightmare experience.
Visit our website to learn more about our latest promotions, loan options and rates! You can also call 1-866-NVE BANK (683-2265) to speak to one of our Lending Specialists, or visit your nearest neighborhood branch.