Doctors, just like most people, want to get the lowest interest rate that they can find on their mortgage loans. If they need to shop for a low-interest home loan, here's how the interest rate is determined to be able to get a good deal. MediPro Capital Finance lists seven factors that influence mortgage interest rates.
1. Your Credit Score
Lenders use the borrower’s credit score to predict how reliable the borrower will be in paying off the requested loan. Ordinarily, the higher your credit score, the lower the interest rate. Make sure to get your credit report before you start home loan shopping. If the report has any errors, have them fixed immediately. If you can, settle some of your debts to improve your rating.
2. Loan Type
Rates can be substantially different depending on what mortgage type you choose. For instance, doctors' mortgages have significantly lower rates than conventional loans.
3. Home price and loan amount
The amount you hope to secure from a lender will be roughly equal to the price of your prospective home minus your down payment. If you’re seeking a particularly small or particularly large home loan, you’re likely to pay a relatively high interest rate.
4. Down Payment
Typically, you’ll get a lower interest rate if you have a high down payment. You’ll have a greater stake in the property, and your lender will downgrade your risk level.
5. Interest Rate Type
Your choice of interest rate type can affect your interest rate. While an adjustable-rate loan could have a lower initial interest rate, the interest rate might significantly increase in response to market trends. Conversely, a fixed interest rate remains constant over time.
6. Loan Term
Usually, shorter term mortgages have higher monthly payments, lower interest rates, and lower overall costs than longer-term loans.
7. Home Location
Pricing may differ depending on the location of your prospective home. Ask your lender whether they factor in location when determining interest rates.
You should consider the offered interest rate before agreeing to a loan. An understanding of how lenders usually determine borrower’s interest rates can help you engage your lender better and a get a rate that suits you.