A Beginner’s Guide to Interest Rates

If you are looking to buy a home, you probably have a lot of questions about how to find the best mortgage loan rate. If you are a first-time homebuyer, here is a quick guide to help you navigate through the home buying process and determining how to land the best mortgage rate.

What is a mortgage rate?A mortgage rate is the amount of interest paid on the mortgage, quoted as an Annual Percentage Rate. The current rates are 4.98% for a 30-year fixed, 4.48% for a 15-year fixed, and 5.1% for a 5/1 adjustable-rate mortgage. Comparing current mortgage rates

The more lenders you look into when shopping for a mortgage rate, the greater the likelihood you have to land a lower interest rate. A lower interest rate can save you hundreds of dollars over a year of mortgage payments and thousands over the life of the mortgage. Finding the best mortgage rate is a big part of buying a home. There are plenty of mortgage tools that can help you find the best home loan rate for you whether you are a first-time homebuyer or a long-time homeowner comparing refinancing rates.

Two Forms of Mortgages Mortgages generally come either with a fixed rate or adjustable rate. Fixed-rate mortgages lock you into one interest rate that you will pay over the term of the loan. The part of your mortgage payment that goes toward the principal plus interest remains constant throughout the loan term, through insurance, property taxes and other costs may fluctuate.

The interest rate on an adjustable-rate mortgage will fluctuate over the term of the loan. An ARM typically begins with an introductory period of 10, seven, five or even one-year, during which the interest is stable. After that, the rate will change depending on the rate index chosen by the lender.

Should You Pay for Points A point is an upfront fee that equals 1% of the total mortgage amount which is paid to lower the ongoing interest rate by a fixed amount, usually 0.125%.