What Affects Your Mortgage Rate?

If you’re a first-time buyer, or if you’ve bought and sold multiple homes in the past, you likely have plenty of questions about the process – and some of them may be about mortgage rates. What factors affect your mortgage rate, and what can you do to get a better rate? This guide explains.

Three major factors affect the interest rate a lender is willing to offer you:

Your credit score
How much you’re borrowing
The loan period, type of loan and other details

Here’s a closer look at each.

Factor #1 That Affects Your Mortgage Rate: Your Credit Score

Your credit score is one of the main determining factors in the interest rate your lender offers you. Along with your credit score, lenders look at things like your debt-to-income ratio (how much money you owe versus how much you make), whether you have negative marks against you on your credit report (such as nonpayment for 30, 60 or 90 days), your job history, and your pay stubs. Lenders want to make sure you’re not a risky investment – and that you’re unlikely to leave them in the lurch without paying them back.

Factor #2 That Affects Your Mortgage Rate: How Much You’re Borrowing

If you’re borrowing the home’s full purchase price to buy, you’re a riskier investment than someone who’s only borrowing 80 percent (or less) of the home’s purchase price. That’s because people who are borrowing less than the home’s purchase price have some “skin in the game.” They’re coming up with their own money to invest in the home, which makes it less statistically likely that they’ll walk away without paying off their loan. Generally, when you put down 20 percent or more, your interest rate will be lower than it would if you borrowed a larger sum.

Factor #3 That Affects Your Mortgage Rate: The Loan Period, Type of Loan and Other Details

The length of the loan, the type of loan you choose, and a variety of other details come together to determine your interest rate. For example, you may get a lower interest rate with a 15-year adjustable-rate mortgage than you would with a 30-year fixed-rate mortgage.

Are You Buying a Home or Land for Sale in Lake City?

If you’re moving to Lake City, we can help you find the perfect place to live. Call us at 386-243-0124 to tell us what you want from your home and we will begin searching right away.

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