Where do mortgage rates come from? How are they determined? And what can you do, as a borrower, to get the best possible rate when buying or refinancing a home in Washington State? These and other questions are answered here, in our mortgage rate guide for Washington.
5 Things to Know About Mortgage Rates
A small book could be written about mortgage rates and how they work. It’s a fairly complex topic. But from a borrower’s perspective, there are just a few important concepts to grasp. And we’ve boiled it down for you in this little mortgage rate guide. Here are five things you should know about mortgage rates in Washington.
1. Rates can vary from one loan to the next.
The lending process can be highly individualized. No two mortgage transactions are exactly the same. There are a lot of variables that can make them different.
There are also several different factors that can influence the mortgage rate you receive when buying or refinancing a home in Washington. The rate assigned to your loan might be higher or lower than another borrower, and for a number of reasons.
We’ve covered some of those influencing factors below (and in this related article). For now, just realize that the actual interest rate applied to a certain home loan might be higher or lower than the “averages” reported in the news.
2. The rate is one of several parts of the monthly payment.
Mortgage rates are one of the four primary factors that make up the typical monthly payment on a home loan. The other three are the principal, taxes and insurance. Collectively, these four factors are referred to as PITI.
This is something to keep in mind when shopping for a home loan in Washington. Mortgage rates are one of the costs involved, but there other others as well. If you use a basic mortgage calculator to determine what your monthly payments would be for a certain loan size, you might not be seeing the full picture.
3. Higher credit scores can bring lower rates.
There’s a difference between average credit scores in Washington, and the actual rates assigned to individual home loans. Credit scores are one of the reasons why borrowing costs can vary from one home buyer or homeowner to the next.
Generally speaking, a higher score could help you qualify for a lower rate on your mortgage loan.
Consumer credit scores are based on current and past financial activity, primarily credit cards and loans. Borrowers who make their debt payments on time tend to have higher scores, while those who experience delinquencies tend to have lower numbers. A lower number indicates a higher level of risk, and could therefore bring on a higher mortgage rate. And the opposite is true for those with higher scores.
4. You might be able to get a lower rate by paying “points.”
We’ve written about the points strategy for getting a lower rate in a separate article. Here’s a quick recap of that tutorial:
Mortgage shoppers in Washington State often choose to pay points in exchange for a lower rate. In this context, one “point” is equal to one percent of the loan amount. This financing strategy is a trade-off. You’re paying a bit more money up front (at closing) in exchange for a lower mortgage rate.
Depending on how long you stay in the home and keep the loan, you could potentially save a lot of money over the long term.
5. Consider both fixed and adjustable-rate mortgage loans.
An adjustable (ARM) loan might be a good option in some scenarios, because they generally offer lower mortgage rates for the first few years. Most borrowers in Washington State, however, choose the long-term stability of the 30-year fixed mortgage.
For buyers who plan to remain in a house for many years, the fixed-rate mortgage is usually the best option. But an ARM might be better if you think you’ll only be in the home for a few years. Please contact us if you’d like to learn more about your financing options.
Have questions? Sammamish Mortgage is a local, family-owned company based in Bellevue, Washington. We serve the entire state, as well as the broader Pacific Northwest region. Please contact us if you have mortgage-related questions.