Let's look at some factors that help determine a mortgage rate today and how you can get a better rate. We'll also discuss several activities for children in Charlotte County, Florida to help you decide whether it's the right place to stay with your family.
Are you a first-time homebuyer? Learn more about the available FHA home loan options in Charlotte County, Florida.
What Drives Mortgage Rates Today
Mortgage interest rates significantly impact the general long-term cost of buying a home. If you're like most homebuyers, you want to get the lowest rate you can find for your loan.
Knowing what factors drive mortgage rates today can help you prepare for the home buying process and put you in a better position to negotiate your mortgage loan. Armed with the correct information, you'll be able to have confident conversations with different lenders, ask them questions and understand your mortgage loan choices.
Here are 7 essential factors that influence mortgage rates today.
Interest rates can be significantly different based on your loan type. Standard mortgage loans include Jumbo, Conventional, FHA, USDA, and VA. Lenders usually decide which product to offer, and each loan type comes with its different eligibility requirements.
For instance, most conventional loans will allow as little as a 3% down payment, while most Jumbo loans need at least a 10% down payment. Moreover, loans like FHA, USDA, and VA are government-insured and come with unique eligibility standards.
Talking to multiple lenders will help you better understand all the loan options available to you.
One of the most significant contributors to a mortgage rate today is the borrowers' credit scores and reports. Credit scores are generally calculated based on the details in your credit report, which contains information about your credit history, including any late payments, credit cards, inquiries, and loans.
Lenders use credit scores to predict how reliable a borrower will be in paying the loan. Typically, consumers with lower credit scores receive higher interest rates than consumers with higher credit scores.
An error on your report can lead to lower credit scores, which may prevent you from qualifying for better mortgage loan rates and terms. So, before applying for a mortgage, your first step should be to check your credit report, which can be obtained every 12 months from credit bureaus. Review it for errors and make sure there are no discrepancies on it.
If you find any errors on your report, dispute them with the credit bureaus to ensure the report is accurate when your lender looks at it.
A regular pattern in the home buying process is that the higher the down payment offered, the lower the interest rate. So, if you can put 20% or more down quickly, do it - you're sure to get a lower interest rate. A lender can view you as a lower risk if you put more toward the home upfront.
On the other hand, if you can't make a down payment of 20% or more, lenders will require you to buy mortgage insurance, commonly known as private mortgage insurance. Mortgage insurance usually protects lenders in the event you stop paying your loan. It adds to the gross cost of your monthly loan payment.
It's always wise to consider the overall cost of a mortgage. The higher the down payment, the lower your overall cost to borrow. Remember, getting a lower rate can save you money over time.
However, even if you receive a slightly lower rate and your down payment is less than 20%, your borrowing cost will probably be higher because you'll have to make the additional monthly private mortgage insurance payments. It would be best if you always considered your borrowing cost instead of the loan interest rate.
Home Price and Loan Amount
Generally, the amount you'll need for your loan is the buying price of your home plus closing costs minus the down payment. Depending on your mortgage loan type and circumstances, your mortgage insurance and closing costs may also be included in your loan amount.
If you've already started your search for a home, you may have a perfect idea of the highest and lowest prices of the house you wish to purchase. If you're just getting started, consider checking out real estate websites to get a sense of the price range of the neighborhoods you're interested in.
Loan-To-Value Ratio (LTV)
Lenders also compare down payments to the mortgage loan amount, which is a borrower's loan-to-value ratio. The more money you put down in your home, the lower your LTV.
When you put less money down, you have less money to keep paying your loan when times get tough. However, if you have your resources invested (putting more money down), you're highly likely to do what it takes to pay off your debt.
Typically, lenders charge high rates when the risk of default is high, which is the case with a low down payment.
Interest rates can vary greatly depending on the location of the home you're looking to buy. There are a few reasons home location can have a significant influence on the rate you may qualify for. These variables include your preferred state and whether the house is in a rural or urban area.
For starters, different states have different foreclosure laws and regulations, which can affect how you can foreclosure on a defaulted property. The other reason is that other borrowers in an area influence the interest rates because most lenders will consider the rate at which homebuyers default in the area.
Whether you're looking to purchase a home in an urban or rural area, reaching out to more than one lender will help you understand all the loan alternatives available.
Interest Rate Type
Interest rates usually come in two basic types: adjustable and fixed. If you opt for an adjustable rate loan, you need to remember that the rates might increase significantly later. Fixed rates don't change over time.
On the other hand, adjustable rates may have initial fixed periods, after which they either go down or up, depending on the market. Your initial rate may be higher with a fixed rate loan than with an adjustable rate loan.
Why Interest Rates Are Currently at Where They Are
Borrowing costs have escalated over the past several months, affecting borrowers' and homeowners' bottom lines. Mortgage interest rates are more than 2% higher than at the beginning of the year. That means any homebuyer hoping for rates to fall might be waiting for a while.
Below, we talk about the reasons rates are currently where they are in great detail.
The Federal Reserve - Fed Hikes
The U.S. government has a say in how mortgage interest rates are affected. The Fed (Federal Reserve) often announces how monetary policy will influence interest rates. They control short-term interest rates by decreasing or increasing them depending on the state of the economy.
Although mortgage rates aren't directly linked to the Fed rates, the prime rate for home loans typically follows suit shortly afterward when the federal funds rate changes.
The Fed mainly manages short-term rates to control the money supply. When the country's economy is struggling, they lower the rates. Remember, these are not rates given directly to consumers, but they are rates at which lenders can borrow money to give to consumers.
And when they decide they need to tighten the supply, they raise the federal funds rate. While this won't directly increase mortgage interest rates, eventually, lenders will have to do the same to help them keep up with their costs to take money from the Fed.
The U.S. economy is said to be in a period of inflation when the cost of goods and services continues rising over time. For instance, if you go to the gas station and find out that fuel prices are higher whenever you fill your car, you know your country or state is in a period of inflation.
Consumers feel an economic pinch when commodity prices rise faster than workers' wages. It will cost them more money to buy groceries, fill up their cars, and even purchase homes. This could cause them to minimize their discretionary spending.
While inflation doesn't directly affect interest rates, it can indirectly cause them to increase. Remember, inflation is the devaluation of the country's currency, which means that your dollar's purchasing power decreases significantly as inflation increases.
What Does This Mean for Potential Homebuyers in Charlotte County, Florida?
Lending has become increasingly more expensive for homeowners and borrowers alike as interest rates continue to rise. These rates jumped 1.5% points during the first three months of 2022. This was the most significant quarterly hike in 28 years.
A higher mortgage rate means a higher monthly payment for borrowers. For instance, on a $400,000 property with a 5.10% mortgage rate, the monthly loan payment is about $2,172. And this doesn't include taxes, insurance, or other loan charges. If the interest rate rises to 6%, your monthly payment will jump to $2,398.
That being so, time is running out if you hope to lock in lower interest rates by refinancing in Charlotte County.
So, How Can You Get a Better Rate in Charlotte County, Florida?
Securing the best possible rate with rising interest rates is more crucial than ever. As you consider alternatives for your next home loan in Charlotte County, it's wise to set yourself up as best as possible to ace the mortgage loan application process and score the lowest rate.
Here's how you can get the best possible mortgage rate.
Put More Money Down
Putting more money down usually helps borrowers obtain lower interest rates, especially if they have enough liquid cash to make a 20% down payment. Of course, your lender can accept a lower down payment.
However, if you put less than 20% down, you'll have to pay PMI, which can range from 0.05% to 1% or more of the original mortgage amount annually. The earlier you can pay down your loan to less than 80% of your home's total value, the earlier you can do away with mortgage insurance, reducing your monthly bill.
Have a Better Credit Score
Generally, lower credit scores can't automatically bar you from qualifying for a loan. However, they can be the difference between securing a lower rate and being hit with costly borrowing terms.
As earlier mentioned, a credit score is always a crucial factor in determining risk. Your lender will use your score as a benchmark in deciding your ability to repay the loan. The higher the credit score, the higher the chances that a borrower won't default.
The best interest rates go to borrowers with high credit scores, usually 740 or more. Generally, the more confident your banker is in your ability to repay your debt on time, the lower the mortgage rate they'll offer.
Clear your bills on time to improve your credit score and eliminate or pay down those credit card balances. And if you must have a balance, ensure it's not more than 20% to 30% of your available credit limit. Plus, check your credit report regularly and look for any errors. If you find mistakes, work on cleaning them up before you apply for a loan.
Adjust Your Home Buying Budget
Rather than timing the interest rate market, try finding a mortgage rate you're comfortable with that perfectly fits into a monthly payment you can afford. When creating a home buying budget, factor in potential rate increases to help you know how much a change could influence your monthly payment.
Instead of stretching your budget to make the interest rate fit, lower your purchase budget to accommodate higher rates. Whatever happens with mortgage rates in the coming weeks, the most crucial thing is to ensure you can comfortably pay for the home you wish to purchase.
5 Great Activities for Children in Charlotte County, Florida
Charlotte County gives you access to the Gulf of Mexico, Peace River, and Charlotte Harbor, which totals over 160 miles of waterway. Professional instructors await to offer family lessons if you're eager to learn how to paddle a kayak or handle a sailboat.
With horses to ride, game venues to visit, and mangrove forests to explore, your entire family can expect a fantastic vacation full of relaxation, adventure, and togetherness.
Below, we summarize our favorite 5 things to do in Charlotte County with kids.
Picnic and Play With Your Kids at the Port Charlotte Beach Park
Yearning for a casual day of unwinding and enjoying the outdoors? This beach park offers your family all the amenities needed for a full day of fun. It features a small beach, fishing pier, and a pool.
Shaded picnic tables fitted with charcoal grills will easily accommodate your picnic. And for your convenience, Port Charlotte Beach Park also includes kayak rentals, outdoor restrooms, showers, and a playground for children.
See Baseball Games at the Charlotte Stone Crabs Stadium
If you're looking for something fun to do with your children in Charlotte County, the Charlotte Stone Crabs Stadium is a place to check out! The Stone Crabs usually play minor League baseball games in the late spring and summer seasons.
These games are a lot of fun to watch, and the stadium features a fun playground for kids. One of the fantastic things about this playground is that your children can play as you keep an eye on them and the baseball game simultaneously.
Remember, these games are seasonal. So make sure you check out their schedule before heading over.
Explore Ponce De Leon Park
Learning and beauty go hand in hand when you take your young ones exploring in this scenic park. Located in Punta Gorda, approximately a 15-minute drive from Charlotte Harbor, the park has many statues of Ponce De Leon, an explorer who landed in the region in 1513.
Aside from the tranquil mangrove boardwalk, Ponce De Leon park features a sandy beach, boat ramp, playground, and fishing piers.
Go Fishing on a Charter Boat
Give the youngest angler in your family the chance to catch a fish by fishing inland with Silver Lining Charters. It will only take about 15 minutes of your launch for the boat to get you to the coastal flats fishing ground.
Here, the backwaters of Charlotte Harbor teem with redfish, trout, and other fish species. A bonus for your children fishing inshore is the opportunity to see wildlife, including sandhill cranes and alligators.
Join a Horseback Trail Ride
If your family wants to experience Florida's wilderness from a different perspective, the Riding Star Ranch horse rides make a perfect option. For beginners, the guide boasts a walking trail ride that starts with some instructions.
Riders usually help each other to groom and saddle horses before taking a quick introductory or refresher riding lesson. Riding Star Ranch also offers other horse trail rides for experienced riders.
Generally, mortgage rates today are tied to the primary rules of supply and demand. Factors like the Fed's monetary policy, economic growth, and inflation all come into play. And, of course, your financial health will also affect the rate you'll receive.
So, if you want the lowest mortgage interest rates in Charlotte County, Florida, do your best to keep your financial health as healthy as possible.