What Affects Your Personal Interest Rate?

Dream home? Maybe…but here’s what’s going to affect the interest you get on your mortgage…

Many buyers often ask me why they aren’t getting the same mortgage rate as advertised. Here’s what you should know: Whenever lenders advertise a particular interest rate, they’re not talking about the interest rate they will offer to every borrower. They state an interest rate that applies to a perfect borrower getting a 30-year fixed-rate mortgage under ideal circumstances. The interest rate you can get for your mortgage is going to depend on your particular situation, specifically the following factors:

1. Your Credit Score:  The better the credit score, the lower the interest rate. Lenders reward you for being a good credit risk.
2. The Loan Product: Some loans carry inherently higher interest rates. For example, conforming-plus, jumbo, and FHA loans all have higher interest rates than a conforming loan
3. The Type Of Home You Are Buying: The rates for single-family homes are generally lower than for condos, coops, or multi-family homes.
4. The Term:  The longer the term, the higher the rate, so the rate on a 15-year mortgage will be lower than a 30-year mortgage.
5. Your Down Payment: If you can’t afford to put at least 20% down, you’ll pay a higher rate. 
6. Fixed Or Adjustable Rates:  Adjustable-rate mortgages will have a lower starting rate, although they can go up significantly once they start adjusting.
7. If You Pay Points: If you pay discount points, you’ll reduce the interest rate you’ll have to pay over the life of the loan. This can be a smart idea if you are going to be staying in the home for a long time.