What You Need to Know About Mortgage Rates on Staten Island

With a competitive housing market on Staten Island and in the surrounding areas, you may be wondering if it’s a good time to buy. If you’re considering purchasing a home, it’s important to work with an experienced real estate agent who can offer advice and guidance throughout the process. Salmon Real Estate is one of the oldest independently owned real estate companies on Staten Island. Here, we discuss some of the factors that typically affect mortgage rates on Staten Island.

What Is a Mortgage?

Buying a house is exciting, but it’s also a major financial investment. Few people have enough money to buy a house outright. Instead, they work with a lender, such as a bank or credit union, which provides a loan to cover a portion of the cost of a house. The borrower is responsible for paying back their lender over time, plus interest, typically through a series of monthly payments. This loan, known as a mortgage, can have a repayment period of anywhere from five to 40 years.

The interest rate on your mortgage may be fixed or adjustable. With a fixed-rate mortgage, you’ll have a set interest rate that stays the same throughout the entire repayment period. That means your monthly payment will be predictable. In an adjustable-rate mortgage, however, the interest is fixed during an initial term – perhaps five or ten years – after which the interest rate can change periodically. There’s usually a cap on how high the interest rate can go.

Curious about what your monthly payment would be on a particular home? With Salmon Real Estate’s mortgage calculator tool, you can play around with different scenarios, such as comparing a 30-year versus a 10-year fixed mortgage.

How Are Mortgage Rates Determined?

When applying for a mortgage, you’ll need to give your lender a wide range of information. They’ll ask about your current income, savings, assets, and other debts such as student loans or car payments. Every buyer’s situation is different, so two similar houses on adjacent lots could have different mortgage interest rates. Here are some of the factors that affect a buyer’s mortgage rate:

Down Payment

One major consideration for the lender is your loan-to-value ratio. This is the amount you’re seeking in a mortgage loan compared to the total value of a residential property, and it’s based on your down payment.

For example, if you’re buying a $300,000 home and putting down 10% (or $30,000), you’ll need a $270,000 mortgage. That means you are borrowing 90% of the home’s value from the bank. If you put down 20% instead, your loan-to-value ratio would be 80% instead of 90%. A larger loan-to-value ratio is less attractive to a lender because it raises their risk. Safer bets usually have lower interest rates, while higher-risk loans have higher interest rates.

Credit Score

Your credit score is a prediction of your future financial behavior, and it’s based on a wide variety of factors such as your debt, how much credit you’re using, and your payment history on different accounts. Most people’s credit scores range from 300 to 850. A higher credit score means you’ll get a lower interest rate.

There are different credit reporting companies, so your score can vary. Most lenders use one of the three major companies: Equifax, TransUnion, or Experian.

Inflation Rates

Over the past decade or so, relatively low inflation has helped keep mortgage rates low, as well. However, inflation rates have gone up since 2021. When inflation rises, lenders tend to raise their interest rates, because the dollar loses its relative value. Higher inflation also lowers the demand for mortgage-backed bonds, which can lead to higher interest rates for all types of mortgages.

Other Economic Indicators

Broader economic factors can affect mortgage rates – and unlike your credit score or down payment, they’re out of your control. For example, mortgage rates tend to follow Federal Reserve rates – when the Fed raises interest rates, mortgage rates will go up, as well.

Choose Salmon Real Estate

In today’s housing market, you need an experienced real estate agent who can help you navigate the buying process. As one of the oldest independently owned real estate companies on Staten Island, The Salmon team is made up of knowledgeable Realtors who understand the local market and can help you find the right property to meet your needs. We take pride in going above and beyond for each client, drawing on our decades of experience in Staten Island real estate. For more information about us, contact Salmon Real Estate today.