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Mortgage Interest Rates: Understanding Your Rate

The mortgage interest rate you receive depends on a number of factors. Your credit score has a heavy influence on this interest rate. Before you apply for a mortgage loan, you need to run your credit reports and get your credit score. Your credit score is derived from the contents of your credit reports so it is important that these records are accurate. If you find errors in your credit records you must dispute them.

Once you are confident that your credit records are accurate, it is important to shop around for the best mortgage offer. The Internet is an excellent resource for finding a mortgage. If you do not have the time or patience to compare loan offers yourself, a mortgage broker may be able to help you find competitive loan offers. Before you agree to use a broker’s services, you should ask for references and fully understand the broker’s fee for services. It is also a good idea to comparison shop mortgage brokers and check references; if you’re not careful a shady mortgage broker can take advantage of your situation and cost you thousands of dollars.

The term length you choose will also influence your interest rate. Term length is the amount of time the mortgage lender grants you to repay the loan. Mortgages with longer term lengths are viewed as a greater risk and therefore come with higher interest rates. Loans with shorter term lengths have less risk and have lower interest rates.

When comparing mortgage offers it is important to compare more than just the interest rates or the annual percentage rate. Use the Good Faith Estimate mortgage lenders are required to provide you to compare all aspects of the loan including the closing costs. Many homeowners make the mistake of not considering closing costs and origination points when comparison shopping. Many of these costs, especially the lender’s origination fees, are subject to negotiation and a little haggling will go a long way to improve your bottom line. You can learn more about your mortgage options, including how to avoid common homeowner mistakes, by registering for our free mortgage guidebook: “Five Things You Need to Know before Refinancing Your Mortgage.”

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