Understanding interest rates are important for every homebuyer looking for a Denver mortgage. The housing market is constantly fluctuating, which means that the interest rates are constantly changing. To help you get a better understanding of what interest rates are, Jeffrey Beattie with the Alliance Mortgage Group has listed different types of rates and reasons why they change.

What Are Interest Rates?

Interest rates are a specific percentage of the amount of money borrowed that is charged by your Denver mortgage lender every month until the amount is paid back in full. Your income and credit score largely determine what type of rates you will receive on your mortgage because lenders want to know that you will pay back however much money you borrow. If you have a high credit score, this shows that you are in good financial standing and will be more likely to pay back the lender, therefore, you will be offered lower rates. If you have a low credit score, your interest rates will be much higher because you will be considered a risky borrower.

Types of Rates

In the United States, there are two main types of mortgage rates that you can get on your home loan. One is an adjustable rate mortgage (ARM), which is where your interest rates fluctuate depending on how the market is doing. This occurs throughout your entire loan term, which makes it difficult for you to accurately judge how much you are going to owe.

The other type of rate is a fixed rate mortgage. This is where you are given a set interest rate throughout the duration of your loan. Your rate will never change so you can budget appropriately and know exactly how much you owe, and how long it will take you to pay it off. Although fixed rates are generally higher than an ARM, this option is more appealing to borrowers who do not like to take risks and prefer to play it safe.

What Influences Interest Rates?

There are multiple factors that influence the rise and fall of interest rates. Some of these include economic growth, fiscal policy, monetary policy, unemployment, the housing market, and inflation.

If interest rates are at an all-time high, consumers will be less likely to borrow from a financial institution because they will be unable to afford a Denver mortgage. High-interest rates can slow down the demand because consumers will not be making as many purchases. If interest rates were low, the opposite would occur where consumers are buying more to capitalize on the low prices.

Contact Us

For more information on interest rates or to get started on your mortgage application today, please contact Jeffrey Beattie at 720-598-0506.

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