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Interest Rates: A Quick Guide

Getting a loan in the olden day was easier since it did not involve a lot of considerations. No questions asked. Just “boom”, there’s your answer. This made comparisons for interest rates to an easy task. Today’s mortgage world does not provide an easy way to compare them.

In fact, say you’ve got two customers buying identical homes in a development. Each customer can be quoted completely different interest rates for different reasons. This may be possible even when the clients have the same credit scores. This is majorly possible because of being assessed with different cost additions and being given different discounts.

There may be a difference in the loans that is one may be taking a federal housing loan while the other may only be taking a conventional loan. A lender has no additions or discounts added to it if the FHA loan has a credit score of 620. But, dip below a 620 and there will be quite a pricing differential. When it comes to a conventional loan, the higher the credit rating, the higher the discounts. A client with 720 credit score, has a higher discount than the one with a credit score of 620. Nowadays, a lender has to understand how to read a chart in order to be able to place a conventional loan quote.

How big or small a loan is may cause a interest rate differentials. Again, you’ll probably pick up a discount if you’ve got a healthy sized loan. However, if you’re financing a smaller amount, it may cost you a bit.

The buyers intention for the property may cause the difference also. if the intention is to use the property as a second home or primary residence, its rating will be higher compared to if it was to use it as an investment property. From an underwriting perspective, a borrower is less likely to quit paying a mortgage for a property that is intended for personal use.

As touched on before, the type of loan matters, too. It is quite unlikely fort VA rates, conventional rates, Rural housing rate and FHA rates to be equal. The interest rates are different even when they are buying the same house. Of course, you can’t get a VA loan if you’re not a veteran or the spouse of one buying a loan. For one to qualify for a rural housing loan, they must not be making too much money and they should be in a specific zip code. So, at times, your choices are limited for you.

The payments may differ even when the interest rates are the same. For those mortgages that require insurance, the monthly premiums also differ.

I guess the best advice is to be patient when considering loan programs and payments. All options should be explored.
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