Financing Interest Rates

By: EconomyWatch Content   Date: 4 November 2009

About The Author

EconomyWatch Content

Follow The Money

EconomyWatch, Content Team

 

  • Dot Div
  •      

Financing interest rates is one of the most important features one should consider when it comes to financing your home. Since a home loan is a long term loan, even a small percentage increase in the loan rate can cause a huge loss. One should consider several aspects such the loan tenure, locking in interest rates, lock-in period, etc. Having a clear picture about these aspects will help a person get a good deal.

Financing Interest Rates - Lock-In Rate

In home financing interest rates, a lock-in is an agreement the home buyer makes with the lending institution to keep the interest rate fixed for a specific period. In the meantime the loan documentation is processed. Usually the lock-in periods are 30, 45, 60 or more days. The home buyer has to pay a fee for lock-in that will be based on the number of days to be locked in — longer the lock-in period; higher the lock-in fee. Many new home buyers do not know when to lock-in and for how long. Generally, a buyer should lock-in when the interest rates increase steadily. Lock-in fees are calculated as percentage of the sales price of the house.

Financing Interest Rates – Check the Credit Score

Usually lenders expect good credit scores from borrowers before awarding mortgage loans. Typically, a person should have more than a 700 FICO score to be eligible for a home loan with the best financing interest rates. If a person has a ‘less-than-ideal’ credit score, it is better to settle all outstanding payments including credit card payments first and then apply for a home loan. Within six months, this person will see improvements in their credit score. With a good credit score one can negotiate with lenders for the best possible home financing interest rates.

A good method to get the best mortgage financing interest rates is having a FICO credit score of more than 700 and request mortgage quotes from various banks and credit unions. One should first explore the bank in which he or she has an established relationship. At time banks offer preferential interest rates for their existing customers.


  • Dot Div
  •      

Most Popular in Interest Rates

Related Links
blog comments powered by Disqus