What Factors Impact Mortgage Rates?

Are you ready to buy your next home but need to figure out mortgage rates and secure a loan? We understand that buying a home is an intricate process, so let’s start with what a mortgage rate even is.

A mortgage rate is simply the rate of interest charged on a mortgage. Rates fluctuate and can be different from person to person. So, just because mortgage rates are at a certain percentage now or you hear someone got a certain percentage doesn’t mean you’ll get the same rate. Mortgage rates change because of different factors, so let’s explore four of them!

Economic Factors

It’s hard when things are out of your hands, but the economy plays a more prominent role in what your loan company can do for you than you may expect. Inflation, employment rates, and the local economy can all play a part in raising or lowering your rates. Another related factor is based on the area where you live and the demand for housing around where you are buying. If houses are not selling as fast, mortgage rates may be lower to help buyers, whereas if it’s a growing metropolitan, the rates may be a little higher.   

Your Personal Finances

You can help influence the rate by having a good credit score. Remember that big purchases impact your credit score, so try not to buy a car or large items before securing your loan, as dips in your score can lead to a higher interest rate. If you can place a down payment on the house, this can also help lower the interest rate as you assume more risk and simultaneously lessen the loan amount. To secure a loan, you’ll need proof of income, so having your papers and finances in order before heading to the mortgage company will make everything easier. 

Getting a VA Loan

Due to how the VA loan process works, you may receive a lower interest rate than you would with securing another type of loan. Armed Forces Bank works hand in hand with military families to help them utilize their VA loan benefits to buy a home. A VA loan gives you the space to secure a loan with $0 down, limited closing costs, and competitive rates. Even if you haven’t been able to save like you’ve wanted, Murphy’s law got the best of you during the PCS, or your credit took a hit; you’ll still be able to secure a mortgage rate that works for your family by working with Armed Forces Bank. *Subject to credit approval.

The Type of Loan

The mortgage rate between a 30-year loan vs. a 15-year loan can differ because the shorter time means less of a long-term risk for the loan company. You may also have a fixed-rate loan which means you may be at a higher rate than a variable loan starts at, but you won’t have to worry about it climbing after a few years. The rate may also shift for a condo instead of a house or a homestead with a few acres. Every loan is unique, meaning your rate will be decided based on your personal situation and the larger economy simultaneously.

When buying a home, remember to keep breathing and know that even though many factors impact mortgage rates, you don’t have to figure it out yourself. And if rates are lower in a year or two, you can refinance into a lower rate. When you are ready to find a home, we at MilHousing Network are here to support you in finding a house you love, and Armed Forces Bank will be ready to help you secure the perfect loan. *Subject to credit approval.

This article is sponsored by Armed Forces Bank, a full-service military bank committed to serving those who served since 1907. Armed Forces Bank provides a vast array of affordable and easily accessible financial products to both active and retired military and civilian clients in all 50 states and across the world. When you’re in the military, your needs are different, and your banking should be too. That’s why no matter where you are stationed in the world Armed Forces Bank strives to make everything from banking solutions to financial advice and personal valuables convenient for you with numerous services, including online and mobile banking tools to help you bank on your schedule. 

Writer: Aj Smit is the author of the book Red Thread: Weaving an Embodied Life of Joy, speaker, glitter enthusiast, and professional weaver of Joy. She is a military spouse in S. Korea with a pup and houseplants galore. Aj has led various Red Tents, retreats, and workshops internationally over the last ten years to help others discover how to weave creativity and curiosity into their lives. You can find her on Facebook and Instagram at @TheJoyWeaver and TheJoyWeaver.com