Home Buying Interest Rates Explained

Interest rates can affect how much money it costs to buy a home. The higher the interest rates, the more it costs to repay a mortgage. Here's what to know.

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Everything to Know About Home Interest RatesAre you buying a Portland home sometime soon? If so, then you'll need to know about interest rates. Home interest rates can have a long-lasting effect on how much you have to pay on a monthly basis after purchasing your new home. The more you know about interest rates, the more informed you'll be as a consumer when the time comes to borrow money. Here's what you need to know about interest rates before buying a house.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

What Are Home Buying Interest Rates?

An interest rate is the percentage of the principal charged by the lender and passed on to the borrower as a fee for borrowing money. Interest accumulates over time. Mortgage interest rates are driven by the bond market, although events in the news can also drive interest rates higher or lower, depending on the nature of the events.

The lower the interest rate, the less money that home buyers pay over time. Low interest rates can save homeowners thousands of dollars over the course of a single year.

What Can You Do to Get a Lower Interest Rate?

There are many things home buyers can do to get a lower interest rate when purchasing a house.

  • Reduce your debt to income ratio. Home buyers with a high debt to income ratio are higher risk for defaulting on their mortgage, and therefore must pay a higher interest rate to offset the risk of borrowing.
  • Shop around. Interest rates may vary from one lender to another, and one type of loan to another; shopping around can help borrowers find the right loan package for them.
  • Put down more money. The more money the home buyer puts down before purchasing the home, the less interest they'll pay over time.
  • Wait for the right time. Home buyers who would like to wait to see if the interest rates will go down may get lucky; this is always a gamble, however.

What Else Can You Do to Make Home Buying Affordable?

Home buying can be expensive! Home buyers who want to make the purchase and moving process as affordable as possible can do more than just save money on interest rates. They can also save money on their home purchase by negotiating a good price for their home. The lower the cost of the house, the less money the home buyer must borrow.

Other ways to make home buying affordable include:

  • Negotiate concessions with the home seller, like the seller paying for a portion of the closing costs.
  • Rent a truck instead of paying for a full-service moving company.
  • Limit the number of home improvements to be made upon moving in, but instead space them out over a period of time.

Home buyers who are strapped for cash can also look into low-money down loans, like the FHA loan. FHA loans require only 3.5% down payment.

Work with a Capable Real Estate Professional

If you're a home buyer who would like to save money on your upcoming home purchase, start by contacting a capable and reputable real estate professional in your area. By aligning yourself with an industry expert, you can save money throughout the home purchase process. Contact your real estate professional today to get started with your home purchase.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

Posted by Gary Ashton on
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