How Will My Mortgage Rate Be Calculated?

How Will My Mortgage Rate Be Calculated?

Are you ready to buy your own home, and trying to determine what the best financing solution is for you, and how your mortgage rate will be calculated? The mortgage rate you qualify for depends on several factors, some you have the ability to control, and others that you will be unable to control, and knowing the factors that determine your mortgage rate can help you be better prepared when you buy your home. If you are looking to purchase a home in Mount Pleasant, South Carolina, and have questions about your mortgage, Lucey Mortgage Corporation can help. Read on to learn more about how mortgage rates are calculated.

How a Mortgage Rate Is Calculated

During a mortgage transaction, a lender will typically agree to finance up to 80 percent of the cost of the home, and you agree to pay back that amount plus interest over a determined period of time. In order to create a payment schedule, your lender will use an amortization formula to create a payment schedule that divides every payment into principal and interest. If you continue to make payments in line with the amortization schedule, your loan will eventually be paid off by the end of the mortgage term. Your mortgage rate is determined by many factors, and your lender will adjust mortgage rates depending on the amount of risk they judge a loan to be. The higher risk a borrower poses, the higher the interest rate will be. Lenders will judge your risk as a borrower by considering how likely you are to not be able to make payments and how much money will be lost if the loan isn’t successful.

Factors That Affect How Mortgage Rates Are Calculated

There are a number of factors that lenders will take into account when they calculate your mortgage. A major factor they will consider is your credit score, and essentially, the higher your credit score is, the better mortgage rate you will be able to obtain. The lower your credit score is, the interest rates will be higher and you will have fewer options. Loan-to-value ratio, which compares the total amount of your mortgage to the home’s worth, is also a factor used to calculate a mortgage. If your loan-to-value ratio is high, lenders will have higher risk, which may result in a higher mortgage rate. Being able to make a larger down payment can give you a smaller loan-to-value, which will help you get a better rate. Other factors that can affect your mortgage rate are the overall state of the real estate market, the area you are looking to buy a home in, the type of loan you obtain, the loan term you agree to, and the type of interest rate you get, (adjustable or fixed).

If you are interested in buying a home in Mount Pleasant, South Carolina, and want to learn more about how your mortgage is calculated, contact Lucey Mortgage Corporation today for a consultation.


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Lucey Mortgage Corporation
861 Coleman Blvd
Mount Pleasant, SC 29464


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