The Trouble with Advertised Interest Rates

By: Jorge Lopez, May 17, 2016

With all the talk recently regarding interest rates and how they’re at historic lows, you may decide now is the right time to begin searching for a new home. After all, the lower the interest rate is, the more money you’ll be saving during the life of the loan. During a 15-year or 30-year mortgage, just a single point difference can mean thousands of dollars in savings. So then what happens when you go to qualify for a mortgage and find out that the quoted rate isn’t quite near those advertised lows?

For starters, your credit score may need to be near perfect to receive the lowest interest rate, somewhere at 800. If you have a high debt-to-income ratio or shaky employment with income that varies, these can work against you in terms of snagging that low interest rate you were hoping for. It’s not just your finances that can have an effect on interest rates; the property you intend to purchase can also be a factor. A lender may quote you higher for a condominium than if you were to purchase a single family home.

Keep in mind that lenders make profits from the interest charged on money they allow people to borrow. Should an institution or lender not feel that it’s necessary to offer a rate that’s competitive, you may receive a quote that’s higher than what you feel you deserve. Focus on the factors within your control, like improving your credit and reducing debt.

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