How Buyers Get the Best Interest Rates (1 of 3)
This is the first of 3 posts on how you, as a buyer can get the best interest rate. Check back each day for more inside tips!
Interest rates are all determined by risk. Lenders want less risky investments, so they are willing to favor the buyer who has a less risky profile. The following are 4 key factors that determine the risk profile of a borrower
- Occupancy of the home
- Type of Property
- Down Payment
- Credit Score
Now, you may hear people say that an Adjustable Rate Mortgage has a lower interest rate and that the period of time you lock in rates provides a lower interest rate. This is all true; however, the borrower risk profile is the primary vehicle that will determine the interest rate a consumer receives. Let’s discuss what these 4 factors reveal:
Occupancy of the home – This is an important factor because purchasing a primary residence will deliver a better interest rate than someone purchasing an investment property. Think about it, if you have a primary residence and an investment property, which one are you most likely to pay if you are struggling? The primary of course, which makes it less risky, hence a better interest rate.
Type of Property – A single family home usually hold its value better than a condo or co-op so lenders will offer better interest rates for the purchase of a single family home. In addition, you may walk away from a condo, but not from a single family home, which makes single family homes less risky for a lender.
In part two, we will discuss the fine points of the Down Payment and how your personal investment can give you a better opportunity on lower interest rates.
