The Impact of the Local Economy on Mortgage Rates in Chester County

Many homebuyers who are getting ready to start shopping for a home forget just how intertwined our local Chester County economy is with the broader mortgage industry, specifically interest rates. If you’re attempting to time the market perfectly or avoid higher interest rates, it can be helpful to understand the factors that impact the housing market.

It’s important that our clients understand mortgage rates are determined, and the impact they have on our local economy here in West Chester.

How Local Economies Influence Mortgage Rate Trends in Chester County

If you’ve ever purchased a house or keep up with economic news, you’ve probably see that the Federal Reserve has been front and center as it relates to the cost of borrowing money and mortgage rates. While the Federal Reserve does have a big impact on mortgage rates, there are several other things that can dictate the interest rate you’re eligible for when you apply for a mortgage.

Mortgage rates are generally determined by a combination of national economic indicators and the conditions of local real estate markets. While overarching federal policies and global economic trends play a significant role, the health of a local economy can also directly impact lenders’ rates. When the economy is strong and thriving, with low unemployment rates and high consumer confidence, lenders tend to offer lower interest rates.

Luckily for buyers in Chester County, our area has a really diverse and strong economy, thanks to industries like manufacturing, education, health services, and finance. This wide range of companies and industries helps keep our local economy strong, even when the national economy isn’t doing too well.

Plus, Chester County is close to Philadelphia, making it attractive for businesses and professionals, and helping the economy and housing prices stay steady. As our area becomes a more popular place to live and work because more people want to buy homes in the area. When there are more people looking to buy homes than there are homes available, there is a local economic impact on mortgage rates and home prices.

Interest Rates and Your Home Loan

The interest rate you can secure will be directly related to the type of home loan program you opt for when purchasing a house. Understanding all of the different mortgage types available can help you make an informed financial decision.

Not sure which home loan program is right for you? Our team at Penn Street Mortgage would be happy to go over your options and outline the best fit based on your long-term goals and budget.

Fixed-Rate Mortgages

Fixed-rate mortgages (also known as conventional mortgages) are usually the most popular type of home loan since your interest rate stays the same for the whole time you’re paying off your loan. This is a great option for anyone who wants to know exactly what their monthly payments will be without any surprises.

Generally, the interest rates for these loans are determined by market conditions at the time of the loan origination. While 30-year fixed-rate mortgages tend to have higher interest rates than shorter-term loans, they offer the security of knowing your rate won’t change over the length of your loan.

Adjustable-Rate Mortgages (ARMs)

Adjustable-rate mortgages, or ARMs, have interest rates that can change, usually based on an index rate. These loans often start off with a lower mortgage interest rate compared to fixed-rate mortgages during the initial term of 5, 7, or 10 years. But after that, the rate changes at certain times.

ARMs could be a smart choice if you’re thinking of selling or refinancing before that initial period is up. But, there’s a catch: if interest rates go up, you might end up paying way more across your total mortgage.

FHA Loans

FHA loans are backed by the Federal Housing Administration and are designed for low-to-moderate-income borrowers. They’re easier to get because you don’t need a huge down payment or an amazing credit score like you do with some other loans. And the interest rates are pretty competitive, which can be a big help if your credit score isn’t where you want it to be.

VA Loans

The Department of Veterans Affairs backs VA loans, which are available to veterans, active-duty service members, and certain members of the National Guard and Reserves. These loans are a great option if you can qualify, because they don’t require a down payment or private mortgage insurance (PMI). Interest rates for VA loans are often competitive with, if not lower than, average mortgage rates for conventional loans.

Jumbo Loans

Jumbo loans are loans that go beyond what Fannie Mae and Freddie Mac say is the limit for a regular loan. They’re perfect if you’re eyeing a pretty pricey property that’s over $760,000. Since they’re bigger loans and a bit riskier for lenders, the interest rates can be a tad higher than your usual loans. But, if you’ve got great credit and can make a larger down payment, you can often get a competitive rate.

The Big Picture

It’s important to remember that local factors are just one piece of the puzzle. Federal Reserve decisions, inflation, and other national and international economic events play a significant role in determining interest rates. However, Chester County’s economy is strong, which provides a level of stability to borrowers who are hoping to get a great interest rate on their next home purchase.

Let Penn Street Mortgage Find You a Great Mortgage Rate

Whether you’re a first-time homebuyer or an experienced real estate investor, finding a great interest rate is top of mind for all of our clients. When you work with our experienced team of Chester County mortgage brokers, you can get the peace of mind that you’ll secure one of the most competitive interest rates available.

We can compare rates and present quotes to you from multiple financial institutions, ensuring you’re making an informed financial decision for your next home purchase based on your individual application.

Ready to get started on your next home purchase? Contact us today and get pre-approved for your Chester County home loan.

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