When understanding mortgage rates today, you will come across two terms; interest rates and APR. The two terms are often used interchangeably, but there are subtle differences between the two, and it's vital to understand the differences:
Are you a first-time homebuyer? Learn more about the available FHA home loan options in Okaloosa County, Florida.
The interest rate is also called the advertised rate or the nominal rate. It is used when calculating the interest expense on your loan. When taking out a mortgage, the interest rate is the percentage attached to the mortgage.
For instance, if you take out a $200,000 mortgage with a 6% interest rate, the annual interest expense for the loan amounts to $12,000 or $1,000 per month. In a nutshell, the interest rate is:
Annual Percentage Rate (APR)
The annual Percentage Rate or APR is more effective when considering and comparing loans from different lenders. The APR includes the loan's interest cost and other fees and expenses involved in procuring the loan. These fees can include closing costs, discount points, and broker fees.
If your home requires closing costs, mortgage insurance, and loan origination fees of $5,000, these fees are added to the original loan to create a new loan amount. So, if you're borrowing a $200,000 loan, it now goes to $205,000, and the 6% interest is used to calculate the new annual payment of $12,300.
To calculate the APR, divide the annual payment of $12,300 by the original amount of $200,000 to get 6.15% which is the APR. Key notes of the APR include:
It gives you a better picture of your mortgage as a whole .
It includes other associated mortgage costs, including closing costs and possible broker fees.
- It is typically higher than the interest rate and might be equal in some rare cases.
How Mortgage Rates Work in Okaloosa County, Florida
If you've tried applying for a mortgage multiple times, you might have noticed the mortgage rates vary each time. That's because the mortgage rate the lender offers you is determined by a set of factors, some specific to you and others beyond your control.
To understand how mortgage rates today work, you need to start with understanding the different types of mortgage rates.
Fixed rates are the most common and preferable among mortgage borrowers because they stay the same throughout the deal, regardless of what happens to the interest rates in the market.
The monthly payments for this type of loan remain the same for the life of the loan, typically 30 years, but shorter mortgage lengths of 10, 15, and 20 years are also widely available. The shorter the loan term, the higher the monthly payments, and the lower the total interest costs.
The upside of fixed-rate mortgages is you can easily budget because of the predictable monthly payments. On the downside, the rates are usually higher; if the interest rates fall, you won't benefit from the lower interest rates.
Adjustable-rate mortgages (ARMs)
The interest rates on adjustable-rate mortgages are not locked. Therefore, your monthly payments change over the life of the loan. The lender will recalculate your monthly payment based on the movement of the interest rates. Also, most ARMs will have a cap on how much the interest rate can fluctuate and how often it can be changed.
Most lenders offer lower interest rates for the first few years of an ARM, often called teaser rates, but these can change afterward. ARMs can be more attractive if you only plan to stay in your home for a few years. Most Arms are tied to a particular index, usually the one-year U.S. Treasury bills plus some additional percentage margin.
Interest-only mortgages are a rarer option usually reserved for wealthy homebuyers or those with irregular incomes. This mortgage rate allows you only to pay the interest for the first few years, resulting in lower monthly payments.
If you expect to own the home for a short time, this mortgage rate could be perfect for you. However, if the home declines in value, you could end up paying more than the home is worth.
After familiarizing yourself with the different types of mortgages lenders offer, the next step is to know how they come up with the mortgage rates. There are various factors that lenders consider when calculating the mortgage rate. These are divided into two:
Personal factors are the things within your control when applying for a mortgage. These include:
Credit score – Mortgage lenders use a credit score to evaluate risk. If you have a high credit score, you're deemed safer than someone with a low credit score. The lender is more confident you'll make your mortgage; consequently, your interest rates are lower.
Down payment – if you pay a more significant percentage of the home's price upfront, it reduces the amount you need to borrow and makes you seem less risky to lenders. This is usually calculated using the loan-to-value ratio.
Mortgage type - The mortgage rate offered also depends on the type of loan you apply for. For instance, jumbo loans have higher interest rates than fixed rates and ARMs.
- Use of the property – Properties that serve as your primary residence or where you're going to live will get lower interests than homes that will serve as second homes or investment properties.
Market factors are beyond your control but still play a significant role in determining the final mortgage you will get. These include:
The U.S. economy – This could range from Wall Street down to factors like elections which can also influence the mortgage rates today. Inflation and unemployment rates also put pressure on mortgage rates.
The Global Economy – What happens outside the U.S. will also affect mortgage rates. Political worries can lower the rates, while good news may push the rates higher.
- Federal Reserve – The Federal Reserve is tasked with guiding the economy to encourage job growth while keeping inflation under control. Decisions to raise or cut short-term interest rates can cause lenders to boost or cut mortgage rates.
Every lender considers these factors when determining your mortgage rates today. That's why the rates always vary.
When to Compare Mortgage Rates in Okaloosa County, Florida
There are many mortgage options, some with better rates and terms than others, making it hard to choose the right one.
There isn't a specific rule against comparing mortgages. You can look around anytime. Just ensure you know what the different options offer.
When comparing mortgage rates, timing is critical. You should know when to start looking around to ensure you make the most of your rates.
The best times to start shopping around for mortgage rates include when your current mortgage deal ends. Your rates are not always guaranteed to stay the same. They could go up, which could cost you more money.
You should also consider comparing mortgage rates when your interest rates have changed. Whether the rates go up or down, you might be able to find a better deal elsewhere.
If your current mortgage has no limit on early payments, you may also consider changing your rates annually by finding another mortgage.
The Value of Comparing Mortgage Rates Today
Comparing mortgage rates may take time, effort, and patience, but it has numerous benefits. These include:
Saves you money
Comparing mortgage rates today aims to find the best terms to save you the most money. If you find a rate with more favorable terms than what you currently have, you could save hundreds if not thousands of dollars.
Pay your mortgage quicker
Comparing mortgage rates can also make it easier to pay off your mortgage quicker. This might not happen with every case of changing the mortgage, but it is a viable option because if you find something cheaper, you can increase your installments to pay off the mortgage faster.
Sometimes mortgages can be stressful, especially when you have to make large monthly payments and manage other essential expenses. Finding the best rates and mortgage terms can bring down the monthly payments and make the amounts more manageable.
How to Shop For Mortgage Rates in Okaloosa County, Florida
Most potential homeowners avoid shopping for the best mortgage rates because they think it's complex and complicated. But it's not. Here are a few steps to shop for the best mortgage rates in Okaloosa County.
Check your credit score
Lenders will use your credit score to decide if you get approved for a home loan and what mortgage rates you will pay. The higher the credit score, the lower your rates will be.
If you have a low credit score, spend the early months of the home buying process trying to improve the score. Dispute any errors if necessary.
Understand the types of mortgages
There are different types of mortgages, each with different mortgage rates and terms:
Conventional loans - These are the typical mortgages you get from a lender. You must have a FICO score of 620 minimum and put at least 3%.
FHA loans - These are government-backed loans popular with first-time home buyers because of their flexible requirements. You can get an FHA loan with as little as 3.5% down and a FICO score of 580.
VA loans - VA loans are government-insured loans that require a 0% down payment and require you to qualify as a veteran or service member.
- USDA loans - The U.S. Department of Agriculture offers these loans to low-income buyers in designated rural and suburban areas.
Understand the repayment terms
Mortgage rates come in either adjustable or fixed rates. Ensure you understand the repayment terms in each case.
Gather your document
Each lender will require various documents depending on your mortgage type. The most basic ones include proof of your income, assets, and credit. These will allow the lender to give you an accurate rate quote.
Get quotes from multiple lenders
Get at least three rate quotes when shopping for a mortgage. The more quotes you get, the higher the chances of saving yourself more money. There's no limit to the number of mortgage companies you can apply with.
Why Should You Use Your Mortgage to Buy a Home in Okaloosa County, Florida?
The real estate market in Okaloosa County is vibrant and diverse. The latest market survey shows the median price of a home in Okaloosa is $327,000. There's also a rise in the number of units sold, and buyers can choose from various options, including condominiums and townhouses.
Besides the exciting real estate market, there are numerous reasons to make you consider buying a home in Okaloosa County, Florida.
Home to white sugar sands, emerald green waters that draw millions of visitors each year, and the Eglin Air Force Base, there's no shortage of exciting and relaxing activities while living in Okaloosa County.
Destiny West Bayside Marina
The Destiny West Bayside Marina is the perfect getaway for watersport lovers. The 600 ft. marina has 25 private dock slips and allows you to bring your watercraft on vacation.
With tons of features and activities to take part in with your boat, there's no limit to the type of fun you and your family can have at the Destiny West Bayside Marina including the 10 pools, bay access, and private beach access and the 700ft award-winning lazy river.
Location - 1320 Miracle Strip Pkwy SE Okaloosa Island, Fort Walton Beach, FL 32548-6822
John Beasley Park
The John Beasley Park offers you all the beauty and amenities of Wayside Park without the crowds. It is an extensive park offering changing rooms, showers, snack bars, picnic tables, and beachside pavilions, among other features.
John Beasley Park is perfect if you're thinking of one place to enjoy the most of Okaloosa Island. The beach has the familiar soft white sand, turquoise waters at the perfect temperature and access to the Gulf of Mexico via a short dune walk. While at the park, you're right next to some of the best restaurants of Wayside Park, like The Crap Trap, Tripp Tide Beach and Floyd's Shrimp House.
Location - 1550 Miracle Strip Pkwy SE, Fort Walton Beach, FL 32548
Princess Beach gives you the ultimate beach experience in Okaloosa, making you feel like you have your island beach all to yourself.
Princess Beach is a low-key spot-on Florida's Emerald Coast. It is obscured by tall dunes and hardly marked. It's the ideal place to go if you're looking to beat the crowds on Okaloosa's island beach.
The beach is accessed by a small dirt turn-off that's easy to miss; if you find your way there, you'll be greeted by the gorgeous turquoise water and pristine dunes, with plenty of peace and quiet.
Location - Princess Beach, Destin, FL 32541
Apply for the Best Mortgage Rates in Okaloosa County, Florida
Okaloosa County. Florida is perfect for families looking for life by the beach. It is serene and busy, ideal if you love being around people. The county has many amenities that will make you feel at home.
Although the price of homes in Okaloosa County is slightly higher, by shopping around for the best mortgage rates, you can still ensure you get your dream home in Florida without decimating your finances.