21 Things That Can Drive Your Mortgage Rate Higher

Wondering why you didn’t receive the low mortgage rate you saw advertised on TV? Well, there are a ton of reasons why the quote you obtained was higher. Let’s explore a lot of them.

1. Low credit score

This is a biggie. Most lenders assume (for the sake of their super low advertised rates) that you have stellar credit. So the fine print might say something to the effect of “minimum 740 FICO score.” That means your interest rate will be higher if you don’t have a score that high.
Fortunately, the fix is easy…work on your scores ahead of time to ensure they’re where they should be and you won’t suffer. You could even get a pricing break in the process if your scores are really good!

2. You don’t occupy the property

Mortgage lenders also tend to advertise rates on the basis that you’ll occupy the subject property. If it’s not going to be your primary residence, expect the mortgage rate to be significantly higher. Put simply, second homes and investment properties create more risk for lenders, and they must adjust rates higher to account for that.

Aside from a higher rate, you’ll also be more limited in terms of how much you can borrow. Sadly, there’s not much of way around this if you’re an honest borrower.

3. It’s a condo

Speaking of the property, you might be subject to a higher mortgage rate if it’s a condominium or townhouse. Again, these properties are riskier to lend on for a variety of reasons, and as such, you will pay more in most situations.
You might be able to avoid the condo hit if you keep your loan-to-value below a key threshold, such as 75%. Of course, not everyone has that type of money lying around.
Also note that lenders often hit borrowers if the property is a manufactured home.

4. You need a longer lock period

Another reason your mortgage rate may tick higher is if you lock in said rate for a long period of time. Perhaps you like mortgage rates where they are, but don’t plan to close for a couple months.
The benefit of that guaranteed low rate for a longer period may cost you…and it could turn out that rates move lower over that time, not higher. Of course, not everyone likes to take risks and you could still come out ahead if they rise.

Read the full article here:  http://www.thetruthaboutmortgage.com/21-things-that-can-drive-your-mortgage-rate-higher/