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Factors Affecting Rates

Many factors affect interest rates. By looking at your complete financial picture, we can give you a meaningful rate quote that addresses your unique situation.

What affects rates?

Credit and Payment History

Making timely mortgage or rent payments is very important. Paying late just once by 30 days or more can affect both the loan and the interest rate offered you. Late payments on credit cards, car payments and other bills can also affect your interest rate and loan amount.

Debt to Income Ratio

Your monthly debt obligations and income get converted to a debt-to-income ratio when you apply for a loan. Lenders often have a maximum ratio percentage that they will allow a borrower to have. Often, the higher the ratio the higher the rate offered.

Loan Amount vs. Property Value


Lenders often refers to this comparison as your loan-to-value (LTV). Because more equity or money down decreases the risks involved with lending, a lower LTV may result in a lower rate.

Property Type

One of the first questions a lender asks involves the type of property you are buying or refinancing. Common types include single-family homes, condominiums, manufactured homes, and multi-family homes. While loans may be available for many different property types — your interest rate might be lower for a single-family home than for a multi-family home. It all boils down to the risk involved with writing loans on a particular property type. The less risky, the better the rate.

Occupancy

Another question lenders frequently ask concerns occupancy type. Whether your loan is for the home you live in full-time, part-time or rent to others affects the interest rate you are offered. Generally, owner-occupants who live in their homes full-time enjoy the best rates, followed by vacation homeowners and property investors.

Loan Amount

Sometimes the amount of money you borrow makes a difference in your interest rate. Just as buying in bulk might reduce the price paid per unit, borrowing larger sums of money might result in discounted interest rates.

Reduced Paperwork

Many lenders offer reduced paperwork options. While this option may increase the convenience of getting a loan for the consumer, it may also increase the risks for the lender. To balance risk with convenience, reduced paperwork often involves a slightly higher rate.

Property State

Different states have different regulations and requirements that result in varying business costs. For lenders, these costs are frequently passed to the consumer in the form of an interest rate. Varying costs mean varying interest rates across the nation.

Points

Borrowers can often receive a lower rate by paying extra points. While the discounts to the interest rates may vary, each point paid typically equals 1 percentage point of the total amount of the loan. While this option increases the up-front costs for a mortgage, it lowers the interest rate.

Market Forces

The Federal Reserve Board has the power to raise and lower interest rates. This ultimately affects the interest rates charged to consumers. For adjustable rate mortgage loans, interest rates are tied to an index. Variations in an index might affect the interest rate of a particular loan both for the initial rate offered and for the interest rate paid over the course of the loan.

For a personalized rate quote that includes how much you can borrow, use our Online Pre-Qualification tool or call 1-800-470-7567 to speak with a Home Loan Counselor.

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