- October 25, 2017
- Posted by: steve
- Categories: mortgage news, mortgage rates
What are the current mortgage rates in Florida? For example, Florida has seen mortgage rates unchanged while the impact of Hurricane Irma is still being assessed.
Current mortgage rates in Florida have been at near historical levels for a number of years.
What does the mortgage rate really mean? How is a borrower’s life impacted by current mortgage rates?
In this article, we uncover the meaning of mortgage rates and how home loans are impacted.
What Are Mortgage Rates?
Mortgage rates are the amount of interest a borrower pays on a home loan, whether that’s a purchase or for a refinance.
Just like any loan, a mortgage payment consists of collateral, taxes, insurance, principal, and interest.
The higher the mortgage rate, the more a borrower will spend on their monthly mortgage payment.
Here’s the thing to remember. On paper, there might not seem like a big difference between 3.00% and 3.25%. What many people don’t realize is that a quarter of a percent is really costing them thousands of dollars.
Let’s Break It Down
If someone bought a home for $500,000 with a 3.00% rate and put 20% down, they’d pay approximately $2290 per month. That figure includes estimates for insurance and taxes.
Let’s look at the same scenario with a 3.25% interest rate. Their monthly payment jumps to $2345 per month. That’s a $55 difference per month.
Again, that might not seem like a lot on paper. Add that up over the life of a 30-year loan, that’s a difference of over $19,000.
That adds up to several vacations. That’s why mortgage rates are so important to any borrower.
What Affects Current Mortgage Rates in Florida?
There are a number of variables that go into figuring out the current mortgage rates in Florida. There are two primary factors – the borrower and economic key indicators.
Think of this as a lesson in macroeconomics and microeconomics.
Economic Key Indicators of Current Mortgage Rates
Generally speaking, people tend to focus on what the Federal Reserve is doing with interest rates.
The Fed is the Federal Reserve or the central bank of the United States. The Fed sets monetary policy and credit conditions to promote economic security.
There is an assumption that when The Fed raises interest rates, mortgage rates go up as well. That’s not true.
10-year treasury yields influence mortgage rates, and The Fed doesn’t directly influence treasury yields. Investors do.
Keep in mind that while investors influence 10-year treasury yields, if The Fed policy raises interest rates and limits the supply of money, mortgage rate could rise.
Personal Key Indicators of Mortgage Rates
The main factor that impacts the current mortgage rates in Florida is the borrower. Sure, there’s the base rate that lenders have, but can a borrower lock that rate in?
When a lender signs off on a home loan, they’re taking a risk. They want to be sure that the borrower will be able to pay back the loan in full without defaulting.
That means they will look at a borrower’s key indicators to determine whether or not they can get a good mortgage rate.
A borrower’s credit score is the major factor in determining their mortgage rate. Lenders want to know someone is a low risk, so they’re going to look at every part of their credit history.
They’ll look at how much a person owes, how long their accounts have been open, and how often they pay on time.
The higher a person’s credit score, the lower their rates will be.
The Loan Amount
If someone said that the interest rate would be higher on a smaller loan, would you believe them?
Most people would think that the smaller the loan, the lower the interest rate would be because it’s less of a risk to the bank.
A smaller loan may mean a higher mortgage rate. In fact, a recent study from Zillow showed that those who borrowed $100,000 paid 10% more per dollar borrowed than those who borrowed $400,000.
It’s important to remember that banks are in business to make money, so the loan has to be profitable, too. Banks don’t make much money on smaller loans, and there are not many banks who offer smaller loans.
Your Down Payment Amount
In most cases, the higher the down payment, the lower the mortgage rate will be. The standard 20% down payment demonstrates to banks that a borrower is willing to “put some skin in the game” with the bank. It also lowers the bank’s risk.
Some lenders will offer programs only to those with higher down payment.
Even if a borrower only has 5% to put down, there are programs available from different lenders that will allow buyers to take advantage of a lower interest rate.
National economic factors are important in determining mortgage rates. Rates also vary by state, so it’s important for borrowers to check the current mortgage rates in Florida as well as national indicators.
The location of a purchase also impacts the type of programs available to buyers. For example, a property purchased in a rural area would be eligible for a USDA program. At the same time, some banks don’t offer programs in rural areas.
The Loan Terms
There’s quite a difference between a 30-year fixed rate loan and a 15-year fixed rate loan.
Banks love speed and the faster a borrower can pay off the loan, the lower the mortgage rate will be.
A borrower’s monthly payment will be higher on a 15-year loan, but they will save a lot of money in the long run because they are paying less interest.
The Loan Program
There are multiple programs available to borrowers beyond the conventional 20% down programs. Each of which can impact the mortgage rate. For example, a borrower may qualify for a VA home loan for service members.
There are also programs for first-time homebuyers that require a smaller down payment. Since this is backed by the Federal Housing Authority, a borrow can still obtain low current mortgage rates in Florida. Banks offer programs for all types of buyers.
Is The Loan Adjustable or Fixed-Rate?
There are differences between an adjustable and fixed-rate loan. These difference can mean a higher rate and more money paid by a borrower.
A fixed-rate loan means that the interest rate stays the same over the life of the loan.
An adjustable-rate loan means that the borrower pays the same interest rate for a period of time (anywhere from three to seven years), then the interest rates can be adjusted based on an index. The index used may vary from bank to bank, with the common ones being LIBOR or the one-month Treasury bill.
The potential impact of an adjustable-rate mortgage is that the rates can jump significantly over the life of a loan, where the interest rate now will be the same 30 years from now on a fixed-rate loan.
The pros and cons to each will depend on a borrower’s situation.
Getting the Best Current Mortgage Rate
There are so many variables in a mortgage rate, how can a borrower get the best current mortgage rates in Florida?
The first step is to plan ahead. Once a borrower makes the decision to buy a home, they can take the necessary steps immediately to repair their credit and increase their credit score.
This can mean paying down debt to lower the debt to income ratio and paying your bills on time for at least two years.
Another way to raise a credit score is to make sure that the amount of debt is about 20% of the credit available.
Saving up for a down payment is also another way to get the best current mortgage rates in Florida. The more money saved for a down payment now, the less interest is paid over the life of the loan.
Borrowers who plan to purchase or refinance in the near future should think twice about changing jobs or careers.
Having a track record of steady income can also impact a borrower’s interest rate. Banks love stability and if a borrower can show two years at the same employer, the less of a risk you’ll be to banks.
It also helps to get sound advice. Prospective buyers should start working with a mortgage professional now, even if they’re not planning on purchasing a home in the immediate future.
A good mortgage professional can help borrowers plan ahead and keep them from making decisions that could cost thousands of dollars.
How Can Someone Get the Lowest Current Mortgage Rates in Florida?
Mortgage rates have been at the lowest levels in decades. Just because the rates are low, it doesn’t mean you can lock in those low rates.
How can you be sure you’re getting the lowest current mortgage rates in Florida?
That’s the easy part. Partner with a mortgage company that has experience and connections with lenders throughout Florida.
New Florida Mortgage is dedicated to helping people find the best current mortgages rates. Florida is a very special place we are proud to call home.
We take pride in our customer service and our business connections throughout the state. Contact us today to lock down the lowest rates possible.