Factors Affecting Mortgage Interest Rates

This BLOG On Factors Affecting Mortgage Interest Rates Was Updated On May 9, 2017

There are certain factors affecting mortgage interest rates. Both government and conventional loans have pricing adjustments depending on the qualifying factors that determine rate.

The biggest factors affecting mortgage rates with conventional loans is:

  • Credit Scores
  • Loan to value
  • Loan Amount
  • Property type

Factors affecting mortgage rates on government loans such as FHA, VA, USDA are the following:

  • Credit scores
  • Property types
  • Loan type
  • Loan To Value are not factors affecting mortgage rates on government loans since they are insured by the federal government

Shorter Term Loans Have Lower Mortgage Interest Rates

Shorter term loans versus 30 year fixed rate mortgages are factors affecting mortgage interest rates on all types of home loans:

  • The shorter the term of the mortgage loan, the lower the interest rate. 
  • 15 year fixed rate mortgage offers a lower mortgage interest rate than a 20 year. A 20 year fixed rate mortgage offers a lower interest rate than the 30 year fixed rate mortgage.
  • Adjustable rate mortgages generally has lower interest rates than a fixed rate mortgages due to the limited liability the lender has.
  • Payments could get higher after the interest rate changes on the adjustable rate mortgages when the fixed rate period is over and the rates starts adjusting.

Larger Down Payments Are Factors Affecting Mortgage Rates On Conventional Loans

A larger down payment “ greater than 20% “- will give borrowers the best possible rate on conventional mortgage loans.

  • Down payments  on home purchases on conventional loans of 20% or less should expect to pay a higher rate as you are starting with less equity as collateral.
  • 25% down payment and 740 credit scores will get conventional borrowers the best rates.
  • Borrowers have the option in buying discount points to lower mortgage interest rates.

Credit Scores And Loan To Value Are Factors Affecting Mortgage Rates

Credit quality and debt-to-income-ratio affects the pricing of Conventional Loans. Conventional Borrowers with good credit will get lower conventional mortgage rates than borrowers with lower credit scores.  Loan To Value and Credit Scores are the two largest factors affecting rates.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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