During these unprecedented times, you may have heard that interest rates are dropping or they are lower than ever before due to the pandemic. While this may be true, it’s still important to understand how mortgage rates work and how they can affect your home buying process now and in the future.
The Basics Behind Interests Rates
An interest rate is the amount it costs to borrow money and is usually calculated in a percentage. Whether you are buying a home or thinking about applying for a new credit card, your interest rate is important and something you want to track. You will usually find higher interest rates with shorter term loans, like payday loans, for example. These are usually not a good financial decision because the lender is making a large profit while you are paying back a large portion more than what was borrowed.
The Federal Reserve is in charge of the Federal Funds rate, the rate that banks use when borrowing from one another. This is the rate that people are referencing when discussing interest rates in the market, as well as purchasing a home. If you are thinking about buying a home and are unsure of when to buy, keep an eye on the market, and take note of interest rates and how they are changing.
Interest Rates and You
The biggest factor that determines interest rates is the economy. Due to the pandemic, the economy is in very poor condition due to the record number of people that are unemployed and not able to go back to work. Even if you aren’t a business major, it’s safe to say that it’s clear the pandemic has affected the economy in a number of ways in the United States as well as all over the world. When people are putting money back into the economy because they are working and spending, interest rates will usually increase. On the other hand, if people are unemployed at higher levels, they are spending less money overall, and the interest rates will be lower.
Keep Your Options Open
No matter if you are choosing to purchase a home or to sell your own, doing research is always important. You’ll want to do a fair amount of research on the market in your area as well as the market in surrounding areas. Shopping around and comparing rates is going to be the best way to make sure you are getting the best option for your area.
Lastly, interest rates are important to those that are investing in a home. Multi-family homes like duplexes and triplexes can be a great way to turn a profit if purchased at the right time. Investors like to target areas that are growing and popular so they can purchase and rent out to people for short or long rentals as the profit margins are great when the market is in a positive place.
Contact Us Today!
Rates don’t wait so you shouldn’t either! We are here to help answer any questions you have regarding interest rates or any other lending related inquiry you have, so give us a call at Commonwealth Mortgage Corp in Conroe, TX today!