Mortgage Rates: 3 Things You Need To Know

Why should you care about mortgage rates? Well, whether you're trying to buy a home or even refinance a mortgage, mortgage rates can affect how much you spend and how much you save. So, here's some facts about mortgage rates you may not be aware of that'll help you be a smarter homeowner and homebuyer. Number one, there are mortgage rate factors you can and can't control. First, what you can't control. Economic worries, such as a pandemic, or political concerns, such as a presidential election, can cause rates to move lower. And good news can cause rates to move higher. Now, what you can control, your credit score. A score of 740 or above can help you secure the best rates. And also your down payment. Your down payment affects your loan-to-value ratio, which is the amount of your mortgage compared to the value of the loan. Now, generally speaking, the higher your credit score, the higher your down payment, the better you look to lenders and the lower your interest rate. Number two, mortgage rates vary by lender. That's why it makes sense to get pre-approved with more than one lender. They'll provide you with what's called a and what that document will show you is your interest rate, along with other fees and costs that the lender may tack on. Compare them side by side to see which offer is best for you. Securing the best interest rate can help you save thousands of dollars over the life of your loan. Number three, finding the best deal is more than just securing the lowest interest rate. It's also about finding the lender that's right for you. So whether it's the reach of a big bank or the personalized service of a credit union, take the time to select the lender that's right for your personal situation. Remember, you're in it for the long haul. What's also important is the annual percentage rate or APR. Now, what that is, is the true cost of a mortgage. The mortgage APR includes your interest rate, along with other fees that the lender may tack on. Now, don't worry if you're not a math whiz. I'm certainly not. NerdWallet has a mortgage APR calculator. Buying a home is one of the biggest purchases you'll make in your lifetime. So if you're approved for a home loan with an interest rate that you're comfortable with, consider locking in the interest rate. That way, the rate will be stable until you close on your loan. Doing so will help you save thousands of dollars in interest and put more money in your pocket. I'm Linda Bell, home and mortgage expert at NerdWallet. And when I refinanced my mortgage, I was able to lower my interest rate by 1% and save $300 a month. Thanks for watching and please subscribe.