Factor Affecting Mortgage Rates

When you apply for a mortgage loan, there are a number of factors that will affect the rate you receive. These include:

The amount of the loan. Mortgage loans that exceed the limits set by Fannie Mae and Freddie Mac will have higher mortgage rates.

The length of the loan. A short term loan such as 15 years will have a lower mortgage rate but higher payments. This will save you money.

Down payment. The more money you have for a down payment, the better the mortgage rate. You will have a much better rate if you have 20% for a down payment.

Closing costs. You have to decide whether you want to pay the closing costs or if you want the lender to pay it. If the lender pays the closing costs, the mortgage rate will be higher.

Adjustable rate loans. Adjustable Rate Mortgages (ARMS) have a lower mortgage rate at the beginning of the loan term but payments will increase as mortgage rates increase over the number of years.

Credit report. Your credit standing influences the rate of the mortgage loan. If you have good credit, you will probably get approved for a lower rate.

Income. If your outstanding debts are barely covered by your income, you will not get a lower mortgage rate. Your income should exceed your current obligations for you to be considered for a lower rate.

The mortgage rate for a loan is the standard interest rate given by a mortgage lender and it is the rate of interest paid on the mortgage loan expressed as a percentage.

Mortgage rates fluctuate frequently, hour to hour, day to day, and state to state. It is important that you keep track of mortgage rates in the state where your home will be purchased. The rise and fall of bonds and Treasury notes have a direct effect on interest rates and this includes mortgage loan rates. It is important for you to know what the rates are before you settle on a mortgage plan.

If necessary, you may want to delay purchasing a home and increase the amount of money you have for a down payment. You may also want to pay down some of your credit card debt to get a more favorable rate.