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12 Factors That Impact Your Mortgage Rate

There Is No "30 Year Rate;" Many Factors Influence A Buyer's RateWe often have buyers or agents ask: “What is your 15-year rate today?” Or “What is today’s interest rate?”

We always respond by explaining there is no single rate, b/c the market moves so often and b/c there are so many things that affect an individual borrower’s rate.

Here are 12 factors that affect almost every borrower’s interest rate:

  1. Property Type: Condos, high-rise condos and multi-unit dwellings (2 – 4 units) usually have higher interest rates associated with them, as compared to single-family dwellings.
  2. Property Use: Investment properties have higher rates than owner-occupied properties.
  3. Credit Scores: Credit scores significantly affect rates. A borrower with a 750 mid-score might have a rate as much as 1% lower than a borrower with a 670 mid-score.
  4. Down Payment: The bigger the down payment, the lower the rate, in most cases.
  5. Loan Amount: Very small loans (under $150,000 for example) can have higher rates, as can very large jumbo loans (over $3 million for example). In addition, “Low Balance” conforming loans under $484,350 will have lower rates than “High Balance” conforming loans (from $484,350 to $726,525).
  6. Loan Type: FHA and VA rates are usually lower than conforming (Fannie/Freddie) rates, and our jumbo rates are currently the lowest of all for very strong borrowers.
  7. Rate Lock Period: Interest rates can be “locked in” or guaranteed prior to close of escrow for 15, 30, 45 or 60 days in most cases. The longer the lock period, the higher the rate. Many lenders quote rates associated with very short 15 day lock periods, even though most escrows require longer lock periods.
  8. Fixed Period/Loan Maturity: The longer a rate stays fixed, the higher the rate. For example, a 7/1 ARM (fixed for seven years) will usually have a lower rate than a 15-year fixed-rate loan, and a 15-year fixed-rate loan will have a lower rate than a 30-year fixed-rate loan.
  9. 1st/2nd Combo Loans: Loans with a concurrent 2nd mortgage can have higher rates too, depending on the loan-to-value ratio.
  10. Points/Fees: Lenders often have hidden points and fees in their quotes that they are not disclosing up front when they just quote a rate.
  11. No Cost Refi’s: “No cost” refinances have higher rates than refinances that have fees built in.  This is b/c lenders have to charge higher rates for a “no cost” loan in order to generate enough extra “commission” to be able to pay for closing costs on behalf of borrowers.
  12. Cash Out Refi’s: When refinancing borrowers increase their loan amounts in order to pull “cash out” against their home, rates are usually higher depending on the “loan to value” ratio.

If several of the above factors work in tandem, the rate can be significantly affected.

For example, if a buyer with a 690 credit score is buying a high-rise condo with 5% down and a high balance loan, his interest rate might be 1% to 2% higher than his rate would be if he were buying a single-family residence with 25% down, a 750 credit score, and a low balance loan.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646