Interest Rates 101

Rumor has it interest rates are gonna keep rising. But you want to buy a house. Sigh. I feel ya. I’m talking to buyers every day about rates and the role they play in buying a home. And while no one has a crystal ball, it’s true that they’re inching upwards. That said, I wanted to share some basic info about interest and how it works so you can make the best decision given your situation this spring. ⁣

An interest rate is essentially the price you’ll pay to borrow money to purchase a home.⁣
Interest rates are displayed as an annual percentage of the total amount borrowed, also known as the principal.⁣
Here’s a straightforward example: Say you borrow $500, and the interest rate is 8%. At the end of the year, you’ll owe $540 ($500 x 0.08).⁣
Lenders make money off the mortgage interest. In the example above, the lender would pocket the $40.⁣
Lenders determine your interest rate using a variety of factors; however, the most important is your credit score. A credit score is a number that predicts how likely you are to pay back a loan on time—the higher your score, the lower your interest rate. ⁣

If you want to talk more, let me know. I’m here to help you navigate every part of buying a home!

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