Where do most buyers focus their energy when considering a new home purchase? On the purchase price. The purchase price is one of the primary concerns in a real estate transaction. Often times buyers forget the importance of interest rates and the role they play.
It is easy to understand the difference between paying $200,000 and paying $195,000 when purchasing a home. But it is more difficult to understand the difference between paying 6.5% or 6.0% interest. Interest rates have a large influence on your payments. Let's look at a couple of comparisons.
$200,000 with a 6.5% interest rate on a 30 year fixed rate loan = payment of $1,264.13/month.
$195,000 with a 6.5% interest rate on a 30 year fixed rate loan = payment of $1232.53/month.
That is only a difference of $31.60 per month.
Now let's look at what would happen if you were to find that same $200,000 loan, but at a better rate.
$200,000 with a 6.0% interest rate on a 30 year fixed rate loan = payment of $1,199.10/month. That simple 1/2 point (percent) drop lowered the mortgage payment by 5.4% or $65.03 per month.
Interest rates change constantly and lenders all have different programs. It is very important that when considering a home purchase that you talk to a couple of different lenders and make sure that you are getting the best rate possible for your circumstances.
The best way to compare lenders is to get "Good Faith Estimates" and compare the Annual Percentage Rate. The Annual Percentage Rate reflects the cost of your loan including the payment and all the lender's fees. This will help you clearly identify which loan is going to cost you more over the life of the loan.
Working with a great lender is key to a successful home purchase. Please feel free to contact me and I will gladly refer you to one of the great lenders that I use.