Common Questions: Interest Rates
process of purchasing a home, there are a few key words and phrases that you’ll start to see come up a lot. One of those is “interest rates”. It’s helpful that you get friendly with terms like this, as they will help you feel like an expert as you walk through the home-buying journey. Of course, your lending and real estate agents will surely be helpful to you in navigating these tricky subjects, but starting ahead is always a good idea!When you’re beginning the
Recently we spent some time chatting with Greg Hermann, a loan officer who has been on the US Lending team for years. He’s talking all about interest rates today, and we think you’ll find everything he has to say incredibly helpful.
What is an interest rate?
An interest rate is rate of return from the investor to the borrower. Simply put, it’s the amount that you’ll have to pay back to your investor for lending you their money, and it’s based on a fraction of the total amount loaned. For example, if you have an interest rate of 4.25%, that’s 4.25% per year of the actual loan amount. If you borrow $100,000, and your interest is 4.25%, your first year of interest will be $4,250.
Why is this number important?
Interest rates are important to consumers because that’s what determines what their payments will be. Regardless of the cost of your home, small changes in interest rates can drastically change the amount of money that you’re paying each month.
What have interest rates been like in 2017?
Interest rates have been sitting in the low 4’s for the last two or three months. They were much lower last year, but we saw a big spike in interest rates after the election. We’ve seen it settle down since about springtime, and now it’s staying steady right above 4%.
Did you know?
Interest rates are actually driven by consumer’s credit scores. When a customer comes in to get pre-approved for a home loan, their interest rates will vary depending on if they have a low or high credit score. The investors have set parameters on credit scoring, so a better credit score will always result in a better rate.
It doesn’t sound too complicated anymore, right? We hope that you’ve been able to learn some new information, and that you’re feeling well-equipped to embark on the process of buying a home. At the end of the day, your interest rate is actually one of the most important numbers for you to know as you apply for a loan. If you work with US Lending, you can be confident that our trusted loan officers will set you up with a loan and interest rate that is perfectly suited to your situation.