What factors influence mortgage interest rates?
- Economic conditions: The health of the economy, inflation rates, and employment levels
- Federal Reserve policy: Changes in the Federal Reserve’s monetary policy (adjustments to the federal funds rate)
- Credit score: Traditionally, a higher credit score will typically qualify for lower interest rates
- Down payment: A large down payment may result in a lower interest rate
- Loan term: Shorter-term loans often have lower interest rates (15-year vs. 30-year)
- Type of loan: Fixed-rate vs adjustable-rate will likely have varying interest rates
- Market competition: Competition between lenders and market conditions can affect mortgage rates
4. What is private mortgage insurance (PMI), and when is it required?
PMI is a type of insurance that protects the lender in case the borrower defaults on the loan. It’s generally required when the borrower makes a down payment of less than 20% of the home’s purchase price. PMI allows borrowers to qualify for a mortgage with a lower down payment but it adds an extra cost to monthly payments.
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Marie Sells Dallas 