When looking for a mortgage, your interest rates are impacted by two things: the economy and your credit score. While waiting for a lower interest rate can make sense, it doesn't always: you need to consider your personal financial situation. Here are a few things to consider.

How Does Your Interest Rate Impact Your Home Purchasing?

Your interest rate is calculated into how much home you can afford. If you can currently only get a high interest rate, you may only be able to get a fairly cheap home. If you're looking at properties that are above your existing price range, this can be important. A very high interest rate can make it simply unfeasible to purchase the property that you want.

However, even if you can afford the property that you want, consider the fact that your interest doesn't build equity: it's just an expense. While mortgage interest is tax deductible, few people itemize their taxes, and consequently few people will see that cost savings.

Can You Refinance Later On?

Many people take a high interest rate now with the idea of refinancing the rate later on. This is particularly popular for people who are just establishing their credit now and expect that their credit will get significantly better in the future.

This is a gamble: if your credit score stays the same or even gets worse, you won't be able to refinance. However, if you can afford a property as it stands, and are simply looking to save money later, it can help.

Are You Able to Pay for Points?

Most interest rates aren't entirely static. You can pay for points, which means you can pay cash down in order to get a better interest rates. For the cost of an upfront payment, you can save tens of thousands of dollars over the price of the loan.

Is the Market in Your Area Hot?

Consider having a 5% interest rate in an area that has 8% home price gains every year. You're still netting equity. If you're in a hot real estate market, your goal should be to get into the market as soon as possible. Even a bad interest rate could amount to larger net worth.

Your mortgage officer can tell you more about whether you could expect a lower interest rate if you improve your credit score, or whether it's best to move forward in purchasing. In many situations, you may want to jump in right away and try to get a lower interest rate later. 

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