What Factors Determine Your Mortgage Rate?

Even the savviest of mortgage shoppers can be at a loss when asked what determines the interest rate they will pay on their mortgage. Here are 8 factors that can affect your mortgage rate:

  1. Credit Score Lenders use your FICO credit scores to predict how reliable you will be when repaying your mortgage loan. Generally, the higher your credit score, the lower your rate. One of the first steps in house hunting is to get prequalified and have your credit pulled. After you have reviewed your credit report, if it needs correction or repair, I can refer you to experts who can assist you.
  2. Property Type Are you buying a single-family home? A condo? A multi-unit property? Will the property be used for primary, secondary, investment or commercial use? All those factors will affect your rate
  3. Down Payment Generally the higher the down payment the lower the interest rate. If you are putting less than 20% as down payment you may be required to obtain private mortgage insurance.
  4. Loan Term the shorter term loans ( ie 15 years) have lower rates than longer term loans ( ie 30 years) The important thing to consider is that even though the shorter term loans have a lower rate, the monthly payment will be much higher since the loan is paid off in a shorter amount of time. So, in our discussions we will weigh the pros and cons of rate vs payment vs loan term
  5. Interest Rate Type Fixed rate interest rate loans have the same rate and payment for the life of the loan. Adjustable Rate Mortgages have a rate and payment for a fixed amount of time but adjusts at a set anniversary date. Even though the initial payment may be lower, if rates go up, so will the payment.
  6. Loan Type There are several types of loans depending on your needs: Conventional – conforming and jumbo, Government- FHA,VA and USDA, and Qualified and Non-Qualified Mortgages. All those loans have different parameters and eligibility requirements. Rates can be significantly different depending on your loan type
  7. Property Location Rates vary throughout the country depending on local trends
  8. Points These upfront fees that can lower your interest rate. You are basically “buying” a lower rate. By paying points you will pay less over time with the lower interest rate. We would determine if paying points works for you. It may be something to consider if you are planning on staying in the property for a long time.

It is not just one factor that determines your interest rate; it is actually a myriad of factors and I am here to help you navigate through the different options available.

Contact Anne Stulpin, NMLS #183943, at 610-574-0473 or via email at annes@pmadvisors.com.

All loans are subject to meeting all qualifications and guidelines. Professional Mortgage Advisors NMLS# 1752417