What Determines Mortgage Interest Rate in Florida?
Florida residents searching for housing face the challenges of an overvalued housing market. (WPTV West Palm Beach) With home shortages, unreasonable rent increases, and exorbitant home prices making it difficult for the average person to find a home that suits them, you’ll need to be meticulous about planning your home buying strategy.
For instance, understanding what determines mortgage interest rates in Florida is crucial. Several factors determine these interest rates, including your credit score and down payment. The good news is that you can have an impact on several of these factors, so you can get started today by optimizing your chances of getting the best rate possible.
Let’s break down what determines the mortgage interest rate you receive from a lender.
You Can Control These Factors That Affect Mortgage Interest Rates in Florida
Some factors that determine your mortgage interest rate are within your control, such as your credit score, down payment, loan term, and loan type.
Your credit score is a huge factor in your mortgage interest rate. It is the tool the mortgage lender will use to determine your reliability when paying your debts. In general, people with higher credit scores get lower interest rates. Conversely, lower credit scores receive higher interest rates from the lender. The best interest rates go to borrowers with a 740 or higher.
Down Payment Amount
The amount of money you put down on the house will also impact your mortgage rate in Florida and elsewhere in the country. The higher your down payment toward the cost of the house, the lower your loan amount. A smaller loan means the lender has less risk; therefore, they can offer you lower interest rates. If you can make a 20% down payment, you can bypass private mortgage insurance (PMI) and lower your monthly payment even further.
As a homebuyer in Florida, your mortgage interest rate is also determined by the loan term you choose. A 15-year mortgage provides a lower interest rate than a 30-year home loan term. Bear in mind that in the shorter term, your monthly payments may be higher. In the end, however, your total cost of the mortgage should be lower.
Different types of loans come with different mortgage rates. Conforming loans, which Fannie Mae and Freddie Mac can purchase, generally have lower mortgage interest rates attached to them. Federal Housing Authority loans (FHA loans), designed for lower credit score borrowers, are backed by the government and keep rates within a reasonable range. Similarly, VA loans provided through Veterans Affairs have low interest rates. Additionally, they don’t require a down payment or mortgage insurance.
Other Factors that Determine Mortgage Interest Rates in Florida
Some of the determining factors of your mortgage rate are uncontrollable. The overall level of mortgage interest rates in the United States is dictated by economic factors.
When inflation goes up, mortgage interest rates tend to follow. Rising prices of goods and services mean that each dollar has less buying power than it used to. With that in mind, lenders raise interest rates to compensate for the lost purchasing power.
As unemployment decreases, indicating a stronger economy, mortgage rates tend to rise. When unemployment is up and people are out of work, mortgage interest rates in Florida will fall.
The Fed can heavily influence mortgage rates across the country. The government agency sets the short-term loan rates that banks charge each other to borrow money. This short-term loan rate is called the federal funds rate. The Federal Reserve adjusts the rate in response to changes in the economy. When the Fed cuts the federal funds rate, banks can provide credit to borrowers at lower interest rates, including mortgage loans.
As the Fed hikes the federal funds rate, it puts a squeeze on banks’ ability to borrow from each other, thereby forcing them to raise mortgage interest rates in order to cover the higher federal funds rate that they have to pay.
Do All Mortgage Lenders Charge the Same Interest Rates?
Mortgage rates vary from one lender to the next because each lender has a different set of conditions that influence its decision-making process. Some lenders may have lower overhead costs, allowing them to offer lower interest rates. Other lenders may have more latitude to take on risk and, therefore, provide lower interest rates. Further, a mortgage lender in Florida could be trying to spur business, so they offer slightly lower rates to achieve that goal. Conversely, if things are going well and business is bustling, lenders might raise rates to slow down the number of applications they are receiving.
How the State Economy Is Currently Affecting Mortgage Rates in Florida
As inflation in Florida is currently higher than in many states and the national average, you may expect that mortgage rates will be higher during this time. (WEAR ABC3) In addition, a 2.8% unemployment rate in the state indicates a strong state economy, meaning mortgage rates in Florida may be up. (Orlando Sentinel) However, as things are marginally cooling down in the housing market, the landscape for borrowing money is not as rigid as you might think.
Associates Home Loan of Florida, Inc. Offers Alternative Lending Solutions
With so many factors that determine mortgage interest rates in Florida, you might feel overwhelmed trying to keep up as you plan your home purchase. You might also feel like some of these factors are working against you based on your personal financial situation, but don’t be discouraged.
Associates Home Loan of Florida, Inc. is a mortgage brokerage firm that specializes in alternative lending solutions and flexible underwriting guidelines. We are passionate about helping people who have stumbled over financial roadblocks in the past obtain mortgage financing to purchase their dream home, investment property, commercial real estate, or land. Contact us by email or phone, or apply online to discover all of the financial options available to you. Call today at (813) 316-2006.