What You Didn’t Know About Home Loans

Thinking about buying a home? Make sure you’re clear on how home loans work before diving in.

Here are some things you may not know about home loans:

Rates fluctuate daily

If you’re looking for a new home, you may be checking mortgage rates as often as some people check their social media feeds, but rates fluctuate daily. Know that the rate you see today may be different than the one you actually get when you get approved for your loan.

The cheapest interest rate does not guarantee the cheapest loan

There’s more to a loan than just the interest rate. Be sure to factor in things like closing costs and how the lender handles equity. And with adjustable-rate mortgages (ARMs), today’s low rate might not stay that way—once it adjusts, your rate (and payment) could increase down the road.

A fixed-interest rate mortgage can ultimately cost you more

Fixed-interest mortgages offer stability, but that security can come at a price. They often come with higher upfront rates and may include costly exit fees if you pay off the loan early. Plus, if interest rates drop during your loan term, you’ll miss out on the savings unless you refinance.

A lower credit score will cost the borrower

A higher credit score can lead to big savings over the life of your mortgage. Even a 100-point difference in your credit score can raise your monthly payment by $150 or more—adding up to thousands over time.

The housing market impacts rates

Lenders need to turn a profit from their loans, which means the higher the volume of loans they process, the less they need to earn from each one to remain profitable. When the housing market is booming, and lenders are granting loans on a frequent basis, they will be more inclined to offer lower interest rates to borrowers.

You can have your mortgage payments automated

Missing a mortgage payment or paying it late can have serious consequences. Avoid that by signing up to have your monthly mortgage payments automatically deducted from your checking account. Most lenders provide this service, so check with yours to see if this is an option they offer.

Understanding the fine print and financial impact of your mortgage options can help you make confident, informed decisions on one of the biggest purchases of your life.