7 Factors That Determine Your Mortgage Rate
The mortgage interest rate on your home loan is what you are charged to borrow the money used to finance your loan. This is how the lender profits over the life of your loan. It is also how they financially mitigate the risk of lending you money. There are several key factors that contribute to determining your mortgage interest rate.
Mortgage rates are projected to increase in 2022, but that does not mean you cannot take steps to help secure as low of a rate as possible.
Here are seven factors that contribute to your mortgage rate:
Credit Score
Your rate will largely depend on your credit score. The higher your credit score, the lower the mortgage interest rate. You can retrieve one free credit report each year at AnnualCreditReport.com.
Loan Type
Mid-Continent Funding, Inc. offers several loan types, including conventional, FHA, and VA loans. Each lending agency has different borrower requirements, and these requirements can affect the mortgage rate.
Mortgage Term
The term or length of the mortgage you choose will contribute to determining your mortgage rate as well. A 30-year loan is considered riskier since this gives the borrower more time to potentially default on their loan. So, a short-term loan can lower your interest rate since longer loan durations carry more risk to the lender.
Purchase Price
The price of the home you are buying can affect the rate. The higher the price, the more risk the lender is absorbing. A lower price can help lower your rate.
Down Payment
A higher down payment on a loan can mean a lower interest rate since you can be considered less of a risk to lend to if you can provide a large down payment.
Location of Purchase
Interest rates will vary depending on the state and the specific location of the purchase property. A borrower’s interest rate can be influenced by whether or not the purchase property is in an urban or rural area, and based on the rate of homeowners who default on their mortgage in the area.
Different states will also have different foreclosure laws, which consequently influence when and how a borrower forecloses, if they default on their mortgage loan, and can affect mortgage rates.
Market Conditions
Lastly, the market conditions at the time of your purchase will directly correspond with your mortgage rate. Rates are set based on market conditions that are out of the control of the borrower and the lender.
Contact a Loan Specialist
Interested in getting pre-qualified for a home loan? Contact a loan specialist today at VeteransLoans.com or call (888) 232-1428.