Rates are a hot topic for California borrowers. Everyone wants to get the best mortgage rate possible when they’re getting ready to take out a loan for their home purchase. Here a few helpful reminders to keep in mind about mortgage rates in California:
California Rates Vary Depending On The Loan Type
There are many different types of loans available to borrowers. Each loan has a variety of factors that influence the rate borrowers will receive. For example, fixed-rate loans tend to have higher rates initially, however, the rate stays the same for the duration of the loan. Adjustable Rate Mortgages (ARMs) often have lower introductory rates that gradually increase and fluctuate over the life of the loan.
The length of the loan also plays a role in the rate. Shorter-term loans, such as 15-year or 20-year loans can have better rates in comparison to the longer 30-year loan.
Higher Credit Scores Can Help California Borrowers Get Lower Rates
The credit score that borrowers see online is different than the credit that mortgage companies and lenders will pull. A borrower’s credit score is determined from three different places: Equifax, TransUnion, and Experian. If borrowers pay their bills on time and have smaller amounts of debt, they will likely have a higher credit score which will help them secure a lower rate.
Credit reports and information from third-parties cannot be verified 100% of the time. Always make sure to consult with a trusted lender when it comes to credit information.
Consider All Loan Types
The 30-year fixed rate mortgage is the standard when it comes to loan types. It works for many types of borrowers: those who can’t afford higher payments for 15-year loans, and lower payments spread out over a longer period. The 30-year fixed rate mortgage also tends to have a higher, but more stable rate.
For borrowers who have shorter timelines, anticipate moving or refinancing their home in the nearer future, an ARM is an excellent option to secure a lower rate. There are a variety of ARM options including Hybrid ARMs that have a fixed rate for an introductory period before adjusting. ARMs have a fixed, lower monthly payment during the fixed introductory period (for example, 5 years for a 5/1 ARM), but then have higher monthly payments after that period. Because of this, it is important to know how long you plan to live in your current home, or if you know you will refinance within the first few years.
Questions about mortgage rates or the homebuying process? Contact JVM Lending’s team of experts to get started!