High or Low Risk Will Predict Your Interest Rate

Irrespective of the quote that you get from a lender on a mortgage, what you end up with determined by a number of variances. Mortgage companies determine if they want to loan money and what the interest charge will be based on the amount perceived risk they think will be involved with the borrower.

There are different issues that increase whether or not the mortgage company thinks the mortgage will be repaid on any Northern Virginia Real Estate. And those factors can proportionately raise the mortgage rate charged to the home buyer.  If the risk goes too high, the mortgage is at a point where the underwriter won’t allow the loan to the granted.

Mortgage amounts – conventional loans for more than the limits set by Fannie Mae and Freddie Mac are called ‘jumbo loans’ and usually carry a higher mortgage rate.

  • FICO score – the lowest rate is given to borrowers with the best credit scores.  But, as the credit score goes lower, the rate the borrower pays goes higher.
  • Occupancy – Home buyers who will be occupying a house as their primary residence are assumed to be a better mortgage risk than buyers of second homes and Investors .
  • Mortgage type – direct home purchases usually carry the lowest mortgage rate, but refinancing a house will be slightly higher.
  • Debt to Income – This is a ratio of a home buyers monthly bills divided by their gross income on a monthly basis. This type of ratio helps mortgage companies assess if the buyer is over-leveraged when it comes to whether or not they will struggle to repay the mortgage.
  • Mortgage ‘Loan to Value’  – the lower the mortgage amount relative to the actual value of the house, then lower the mortgage rate.
Any combination of these factors will generally put restrictions on a home buyers ability to obtain a mortgage at the best interest rate advertised. But, if you get pre-approved by a recommended mortgage company, before you shop for a house, that is the best way to know up front what interest amount and rate you can get. Feel free to call us for a recommendation.

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