The total U.S. consumer debt balance increased to $17.1 trillion in 2023, with mortgages representing over 70%. With those statistics, it’s safe to say that you will most likely borrow money from a lender at some point in your life if you want to own a home.
When you open a mortgage loan, it’s essential to understand the borrowing process, including loan interest rates and APR. This article will review the procedure closely so you can make an informed decision when requesting a loan.
Definition of loan interest rates
First and foremost, loan interest rates are the amount a borrower pays a lender for borrowing money. The higher the interest rate, the more the borrower will pay over the life of your loan.
Definition of APR
APR is short for annual percentage rate. A loan’s APR consists of the interest rate plus any additional charges. It includes origination and monthly service fees. Generally speaking, the fees help the lender cover the costs of underwriting and processing the loan.
You can easily compare the jumps in fees when you borrow from a bank versus a credit union. For instance, at Achieva Credit Union, profits are returned to members in the form of reduced fees, perks, and low rates.
By knowing both the interest rate and the APR, you’ll get a better picture of how much the financer adds to the cost of the loan. It can give you a fair judgment of the terms, and we recommend reviewing these numbers closely before you sign any agreements.
The behavior of mortgage loan interest rates
Mortgage rates tend to increase during economic growth, including when we experience higher inflation and low unemployment. Conversely, mortgage rates decrease when the economy slows down.
Additionally, when a lender sets your terms, they calculate according to the average national rate and your credit score. With the possibility of fluctuation in mind, you should consider whether or not you want a fixed or variable-rate mortgage loan. There are advantages and disadvantages to both, so make sure to talk in-depth with your lender or wealth advisor before deciding.
Steps to apply for a loan:
1. Identify how much you need to borrow.
2. Review borrowing options with a lender.
3. Check your credit report and eligibility.
4. Get your documents ready.
5. Submit your loan application.
6. Sign your loan agreement.
Call today to find the best mortgage fit for you, and let Achieva help you find your way home. Call 866.617.6373 to speak with a local mortgage advisor.
House listing levels
While today’s rates are relatively higher than before, low housing inventory keeps sellers in charge of the markets. This time of year usually sees an increase in new housing listings anyway. However, new listings were up 9.5% compared to 2023, according to Realtor.com. By understanding how loan interest rates and APR affect your mortgage, you’ll be prepared to purchase your dream home.
Need more finance inspiration? Continue following the Achieva Life Blog for additional budgeting articles.
