Are you a first-time homebuyer? Learn more about the available FHA home loan options in Leon County, Florida
Your credit score is like your financial wellness indicator—a good credit score is 720 or higher, depending on your lender. Your credit score is determined by your credit report information which includes your credit history, such as your credit cards, loans, and payment history.
Lenders use this information to assess your reliability in repaying the mortgage. Therefore, your credit score dramatically influences your interest rate.
Generally, a high credit score increases the possibility of qualifying for a mortgage with a lower interest rate since the chances of you defaulting on the loan are low.
In most cases, the lender offers you better interest rates closer to the advertised rate. On the other hand, having a low credit score leads to a higher interest rate with fewer options because the chances of you defaulting are high.
A down payment is an upfront payment, which is part of the purchase price you pay when closing your mortgage. The down payment is usually at least 20% of the home's value, and it's deemed as an investment in the home.
Putting a down payment shows your lender that you're committed to paying your mortgage. The best part of making a higher down payment is that it helps you lower your interest rate.
The higher the down payment, the lesser amount of funds your mortgage lender gives towards the transaction. This, in turn, reduces the risk of the transaction hence the lower interest rates.
However, if you can only afford a down payment of less than 20%, the interest rate can be higher, but you can opt to pay for private mortgage insurance (PMI), which protects the mortgage provider in case you default on the mortgage.
Lenders usually take your debt-to-income ratio into account when approving your mortgage application. It is the portion of your gross monthly income used to pay your debts, and lenders use it to determine how much you can borrow.
A DTI ratio of less than 36% is ideal to qualify for a mortgage. A higher ratio may result in higher interest rates, but it may vary according to the situation. For example, your lender may approve a higher DTI of 41%, provided you have a consistent income, a high credit score, and substantial savings.
If you're looking for homes in different places, it's worth noting that the property's location determines the interest rates. Homes with good amenities and connectivity tend to have a higher resale value.
In contrast, older houses or homes in rural areas have a lower value. Lenders consider homes with higher resale value lucrative and will charge lower interest rates since they are easy to sell.
Apart from the resale value, local borrowers affect rates as well. Your lender may factor in the default rate of homeowners in the area, and the outcome determines your interest rate. Also, different states have varying laws on the foreclosure of homes.
Under these circumstances, the property is likely underwater, meaning the outstanding mortgage balance is greater than the property's value. Due to this, the interest rates for a foreclosed home are much higher.
A loan-to-value (LTV) ratio is calculated by comparing your down payment to the loan amount. A low-down-payment increases your LTV, which poses a higher risk for the lender.
A high LTV implies that you are less likely to retain your mortgage when times are tricky since you have invested a small amount in your home.
But you're more likely to pay off debt if you have invested significant money. Low down payment loans come with higher interest rates due to the increased risk of default.
The Price of the Home
The price range of the home you hope to buy may already be clear to you if you've started looking for homes.
A high cost of a home means that you need a substantial mortgage, and the lender may consider it a more significant risk. Hence the interest rate will be high compared to a lower home price.
Type of Interest Rate
The two types come in two introductory interest rates adjustable and fixed. The fixed interest rates remain constant over time, while adjustable rates are initially fixed and later fluctuate depending on the market.
A mortgage with a fixed interest is slightly higher and remains constant for the entire term of the loan. In contrast, the adjustable rate is fixed for a specified period and then changes to a floating interest rate later.
The duration of the mortgage determines the interest rate. Usually, the repayment terms of most mortgages are either 15, 20, or 30 years.
Though you pay lower monthly installments for the longer-term mortgages, they charge a high-interest rate. Meanwhile, the shorter-term loans have a higher monthly payment but lower interest rates.
A mortgage lender considers if you are purchasing a home for your primary residence, your second residence, or investment purposes.
A primary residence usually has the lowest interest rate since it's where you live. You don't want to lose your home, so you'll make your payments on time.
Type of Mortgage Loan
The interest rates vary significantly for the different mortgage loans.
For instance, government-sponsored loans such as the Federal Housing Administration loan come with a high-interest rate, but you require a lower down payment than conventional loans.
The differences in eligibility requirements significantly affect your interest rates.
Why Interest Rates in Leon County,Florida are Currently at Where They Are
The Mortgage rates today are constantly changing due to different factors. Interest rates fluctuate for various reasons, and they are not always predictable.
Mortgage rates are a vital factor in buying a home, and these factors help you understand why the interest rates are rapidly increasing. They will help you compare multiple lenders and plan when to lock in your loan.
The Federal Reserve Hikes
One of the most critical factors affecting interest rates, including mortgage rates, is the Federal Reserve Bank's monetary policy. Mostly, mortgage rates tend to move similarly to the federal funds rate.
The Federal Reserve does not explicitly control mortgage interest rates, but raising the interest rates to control inflation may lead to higher mortgage rates.
The interest rate on a mortgage tends to rise when there's high inflation. Mortgage lenders are likely to charge high-interest rates during inflation to compensate for the loss of purchasing power.
The high mortgage rates ensure that lenders make a real profit on their interest returns. Therefore, inflation makes it more expensive to buy a home.
Slowing Housing Market
Mortgage rates are also affected by conditions and trends in the housing market. The increasing interest rates and the high price of homes have caused potential homeowners to reconsider buying a home.
The high cost of purchasing a home pushes potential buyers out of the market, and you end up renting instead of buying a home. Due to the high prices, sales of homes have been low.
Mortgages and property sales tend to increase in a strong economy. Rates can rise higher as demand increases. Mortgage rates are low when the economy is in recession, increasing demand for homes.
If the interest rate goes up, the low-interest market will have fewer buyers, resulting in fewer loans. But if the economy improves, you have more money to spend, not just because credit is cheap, which allows lenders to charge higher interest rates.
The Bond Market
The bond market determines mortgage rates. Mortgages-backed securities are bonds secured against real estate and other home loans and sold in the bond market.
These mortgage bonds are created by pooling together various loans with similar characteristics. Mortgage rates rise when mortgage bonds are in high demand and decrease when they are in low demand.
Pro Tips for Getting the Best Mortgage Rates Today in Leon County, Florida
The key to buying a home is getting a reasonable mortgage rate. Although interest charges are part of any loan or credit agreement, you can still ensure that you're getting the best deal and saving as much money as possible. Here's how to get the best mortgage rates today.
Improve Your Credit Score
The first step to securing the best mortgage rate is to check your credit scores and reports with the credit bureaus. You cannot qualify for better rates and terms if your credit score is low.
Make timely payments and pay down your debts and credit cards to improve your credit score. It may take a while to improve your credit score, but it will be worth it when it comes time to apply for a mortgage.
Save for a Down Payment
Lenders may offer you a lower interest rate if you invest more money in the property. Making a higher down payment lowers your mortgage, and you get lower interest rates.
You can also avoid private mortgage insurance (PMI) altogether by saving for a more significant down payment. A larger down payment can save you money on PMI even if you can't put the 20% down payment.
Lower Your Debt-to-Income Ratio
To determine your mortgage rate, a lender looks at your current financial situation to determine whether you can pay off your existing loans while taking out a new one. You'll have a higher ratio if you add in more debt, whether it's recurring or housing debt.
You can lower your debt-to-income ratio by not taking on more debt, increasing your debt payment, and finding more sources of income. Calculate your debt-to-income ratio monthly to stay on top of your finances.
Take a Shorter-Term Loan
While not everyone can afford a 15-year mortgage, you might consider a shorter-term mortgage if you can afford to pay off your home earlier with higher payments. Due to the shorter repayment period, a shorter-term loan typically carries a lower interest rate.
Your interest rate will be lower than a 30-year loan despite your higher monthly payment. You'll pay less interest throughout the loan than other home loan options.
Obtain Quotes from Multiple Mortgage Lenders
To get the best deal, you should compare offers from different lenders. You can save thousands of dollars over the life of a loan even if the interest rates differ only by a few dollars.
You have a better chance of securing the lowest rate if you speak with several different lenders and do upfront research. Without comparing rates, it's impossible to know whether another lender offers a better deal.
Lock in Your Mortgage Rate
The mortgage rate fluctuates every day. The same mortgage rates from a lender will be different the next day. Closing a mortgage takes time, and the mortgage rates will change during this period. Request your lender to lock in your rate once you sign the contract to avoid higher rates.
Why Leon County, Florida is an Attractive Place for Families with Kids
Leon County, Florida, boasts many unique characteristics that make it an ideal place to live with kids. The small town is the perfect place to call home, thanks to its excellent environment and pleasant weather.
Leon County has plenty to offer families with kids with free parks and activities. If you're considering moving to Leon County or already live here, here are activities your kids will love.
Candy Making at Lofty Pursuits
Lofty Pursuits is a childlike fantasy world designed creatively and precisely, from the toy store to the vintage ice cream parlor. Your kids will enjoy playing table games, toys, and the root bear floats. They will also make candy using an old method that dates back a century.
Tour the Mag Lab
The National High Magnetic Field Laboratory offers a free resource for kids to learn about magnetism, science, and electricity. Kids learn the easy ways to make a simple magnet and watch ground-breaking science demos.
Mag Lab offers one-of-a-kind guided lab tours where the kids can witness the strongest magnets in the world and their uses.
Hang Out at Tree-to-Tree Adventure
The kids will enjoy crab walks, tightrope walking, nets jungle bridges, and zip line adventure with three different course sets. The kids can choose from the easiest and middle levels as they experience nature high in the trees. In this course, body heights determine who can participate.
Take a wildlife tour at the Tallahassee Museum
The Tallahassee Museum is home to historical exhibits, nature trails, and exotic wildlife. A boardwalk leads through nature trails where kids can observe and learn about the different wildlife. The Tallahassee Museum also offers kids programs such as school break camps and camping.
Tour Wakulla Springs State Park
This beautiful state park hosts Florida's most significant and deepest freshwater springs. The kids can experience Florida wildlife up close by taking a riverboat tour to watch manatees, alligators, and a wide range of birds. The Wakulla springs are also great for swimming with the kids and having picnics in summer.
The Bottom Line
Leon County, Florida, is a perfect home for you, and your kids will love a peaceful area with perfect weather with lots of fun outdoor activities. Though the market conditions are out of your control, you can boost your likelihood of securing the best mortgage rates by improving your credit score and saving for a down payment.
The mortgage rates today fluctuate for different reasons, and you must be competent in comparing different lenders for the best deal. You can save much money in the long run by seeking the best mortgage deal.