You had a dream to own your home a few years ago. As part of your plan, you decided to shop around and get quotes from mortgage lenders in Texas. Your plans did not go as planned. Recently, you realized you have the required down payment amount. You are ready to get back to the homeownership path.
However, when you visited the lenders, you found that the mortgage rates have increased by 7%. The information is heartbreaking. If this is your case, you need to note that mortgage rates are not fixed. They shift from time to time. Several factors affect mortgage rates in Texas. Here are some of them:
The prevailing economic conditions
Economic conditions play a central role in determining mortgage rates. When the economy of Texas and the entire country is thriving, people earn a high income. The increase in income prompts demand for goods and services.
Since you and your colleagues have a high purchasing power, you will think of buying properties and investing in real estate. This aspect will lead to an increase in home loan and mortgage loan demands. The demand will push the mortgage rates high.
On the other hand, a slowdown in economic growth will impact your purchasing power. Only a few people will be seeking loans to finance their properties. In response, lenders lower mortgage rates to try to attract customers. Hence, economic and market forces determine how much you will pay
Inflation
Inflation is another factor that affects mortgage rates. It occurs when more money is in the market than the products sold. The issue affects both individuals and institutions. In other words, you will need to spend more dollars on a product you could get at a lower price.
Inflation decreases the value of currency which pushes down its purchasing power. As a result, investors demand compensation to compensate for the lost purchasing power. The treasury and banks respond by increasing the mortgage rate. So, when inflation is high, your lender will increase the interest rates of their mortgage.
Borrower’s credit scores
When you approach a Houston mortgage broker for home loan information, they will want to know your credit scores. These scores act as the compass in determining the next course of action. The lenders want to be sure that you can repay their loan. For this reason, they will pay attention to your credit scores in determining your mortgage rates.
When your scores are reasonable, you will get lower rates. The opposite is also true. Poor scores will lead to high rates. So, to get better mortgage rates, you must keep your scores between the 800 and 620 range.
Loan term of your mortgage
How long are you going to take to repay your loan? The loan term is another essential consideration that affects mortgage rates in Texas. Lenders will charge you a higher rate when you need a longer period to repay the loan. A shorter term will attract lower interest.
The reason for these rates is the scale of the risk involved. Long-term loans are risker as they have high exposure to economic and market fluctuation effects. The short payment period means that the market will not have undergone a huge change. So, the term of the loan repayment impacts the mortgage rate charged.
Type of property you are buying
Many people think that property is property. You will get the same interest rates regardless of the property you purchase. If this is your thoughts, you are wrong. The lenders do not only consider the structure. They go the extra mile to consider its use.
When you take a home loan to buy a property for a primary residence, you will get lower rates than people buying a second home. Also, a property that you are seeking to rent out will attract the highest rates. The lenders consider this property investment and will charge a rate proportional to its use.
In addition, you will pay more when you need a home loan to buy a condo than when purchasing a family home. The condo is prime property since it sits in an urban area. So, the property type you are seeking to finance with a mortgage will be the base of the interest rate charged.
Wrapping up
As you can see, internal and external factors affect the mortgage rates in Texas. These factors will determine the interest rate you will pay in a given period. So, it is important to pay attention to them and take advantage of them when an opportunity for lower rates surfaces.
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