What Affects Mortgage Rates?
Your mortgage rate is affected by a number of factors, such as your credit score, the type of rate you choose and your property's location. By knowing more about these factors, you can improve your chances of qualifying for a better rate.
Your credit score, also known as your FICO score — named after the company that created the scoring model — has a big influence on your rate. That's because it tells us about your credit history and how well you've managed it. The higher the FICO score, the better it is — and the more likely it is you'll qualify for a lower rate.Learn about the impact of your credit score
There are two kinds of mortgage rates: fixed and adjustable. Fixed rate mortgages don't change, which means your monthly payments will stay the same over the life of your loan. Adjustable rate mortgages (ARMs) typically start at a lower rate, but change over time.Learn more about rate types
Interest rates also change based on the loan type you choose. While conventional loans are the most common, people who need a larger loan may choose a jumbo loan. Similarly, people who qualify for government programs like Federal Housing Administration (FHA) or Veterans Affairs (VA) loans may choose those instead — though they have specific eligibility requirements.Learn more about loan types
There are two kinds of points. Mortgage points are fees you pay at closing to reduce your interest rate. If you plan to stay in your home long term, mortgage points might make sense for you. Lender credits (also called rebate points) give you reduced closing costs in exchange for a higher interest rate. If you're short on cash, lender credits can help you cover closing costs.Learn more about mortgage points
Your rate can also be affected by the property type (think house vs. condominium) and its location, but also how you plan on using it. For example, a single-family home used as your primary residence may qualify for a lower rate than a single-family home used as an investment property.
Your loan term is the period of time you have to repay your mortgage. Loan terms can vary from 5 years to 30 years, with 15-, 20- and 30-year periods being the most common. In general, shorter loan terms have lower interest rates, but higher monthly payments.