How Are Mortgage Rates Determined?

First, What is a rate?

When we say “Rate,” what we actually mean is “Interest Rate.”
 
Simply, this is the cost you pay for borrowing money. Your mortgage lender takes a risk by giving you money, so they charge interest on the loan to make the risk worth it. That interest is a percentage of the loan amount that you pay on top of your principle.
 
For the most part, rates move with financial markets (specifically, the bond market) and the economy. However, every client receives a custom rate specific to their situation.
 
 

So HOW ARE MORTGAGE RATES DETERMINED?

Did you know that mortgage rates change daily? Even hourly? Rates move often and are affected by a tangled web of factors connected to both you and the economy as a whole.

 
Besides the market’s position, below is a simple list of some of the factors that will affect your rate.
 
  1. Credit Score
  2. Loan Program
  3. Loan Amount / Size
  4. Fixed or Adjustable Rate
  5. Down Payment Amount / Equity
  6. Type of Mortgage Insurance (if any)
  7. Type of Property (ie. Condo vs Home)
  8. Residence Type (ie. Investment vs Primary)