In the market to buy a new home in Tucson or the surrounding areas? Our clients have the privilege of access to home loans and mortgage lending options. Keep reading to learn more about mortgage rates and how you can secure your next biggest asset.
Mortgage rates are usually a fixed percentage, amount, or figure determined by a lender or bank. While most rates are fixed, some can be variables or fluctuate with a benchmark interest rate.
When looking to determine a mortgage rate, there are two factors that may influence it. Those are an e-comprehensive credit profile, and current housing market rates.
Depending on how the housing market is doing, the lender may assess a different rate. It’s important that you take these considerations into account as a new homebuyer.
A prime rate represents the average rate that banks are offering for credit. Banks reserve prime rates for highly qualified borrowers. They follow the Federal Reserve’s funds rate at a percentage of adjustment of an extra 3%. In essence: whatever the Federal Reserve’s funds rates are, you can expect to pay 3% higher.
The 10-year Treasury yield is the yield that the government pays investors that purchase the specific security. Purchase of the 10-year note is essentially a loan made to the U.S. government. The 10-year yield is used as a proxy for mortgage rates. It’s also seen as an indicator of broader investor confidence in the economy. A rising yield indicates falling demand for Treasury bonds, which means investors prefer higher-risk, higher-reward investments.
A borrower’s credit score is a primary component in assessing the rate of a mortgage loan and its total amount. Higher scores yield lower interest rates because the risk is lower. The higher the risk, the higher the rate. A high rate ensures the lender recoups the initial loan amount faster in case of default.
A customer’s credit history and how they prioritize past obligations can help determine the chance of paying off a mortgage. Therefore, all consumers and borrowers alike should seek the lowest rate possible when their credit score has reached a favorable range.
Lenders look at two factors to determine your debt-to-income (DTI) ratio to access mortgage rates. Those are your consumer information and credit reports.
Your DTI ratio is a percentage that determines income already taken up by other obligations. As a rule, your credit ratio should hover at 25% and never exceed 30%.
Another way to help your debt is to pay your bills on time. A payment that is three days past due impacts your credit negatively. If you have missed payments, get current immediately and stay current.
Paying off a collections account will not remove it from your credit report. Lenders may begin providing loans because you have attempted to rectify the issue. But, it does not mean it will not hurt you.
You must use credit to have credit. If you have cards open, do not close them. Attempt to keep the balances low and at a 30% DTI ratio. This will increase your score over time.
At Priority Lending, LLC, our clients access the best possible mortgage rates. In the market for a new house in Tucson, AZ? We would love to help you secure a loan for your next asset.