If you're in the market to buy a home, you should understand how the mortgage rate affects your ability to afford a home and watch mortgage rates carefully.
A mortgage rate is the interest rate you pay on the money you borrow to buy your house. A lower mortgage rate makes homes more affordable because it costs you less to borrow money, which in turn increases your purchasing power (the financial ability to buy the home). Lenders set a mortgage rate for each person based on several personal factors, such as your credit, which determines the risk of loaning you money and whether you qualify for a loan, in addition to current market rates. Even a small difference in your interest rate can make a big difference in your payments over the life of your loan. That’s why it’s important to watch mortgages rates closely if you’re buying a home.
Did you know?
The 30-year fixed mortgage rate hit a record high of 18.63% in 1981.