Understand How Mortgage Rates are Determined

Mortgage Rates

Every potential homeowner wants to get the lowest interest rate for their mortgage loan, but not everyone understands the factors that go into determining your mortgage interest rate.

In addition to your credit score, lenders will use the following factors to determine your interest rate:

  • Home Location: Lenders will often offer different interest rates depending on what state or county you live in.
  • Down Payment: A larger down payment usually leads to a lower interest rate. Lenders assume less risk if a home buyer has more money invested in the property. If you can comfortably put down 20 percent or more, do it. You’ll usually get a lower interest rate and pay less over the course of the mortgage.
  • Loan Term: Shorter term loans will generally have lower interest rates and lower overall costs, but higher monthly payments. Your monthly payment and the total amount of interest you will pay over the life of the loan will depend on the loan’s length and interest rate.
  • Loan Type: Some borrowers may qualify for loan programs through the Federal Housing Authority (FHA), S. Department of Agriculture (USDA), or Veterans Affairs (VA). Qualifying for any of these programs may affect your mortgage eligibility, down payment, interest rates, and other costs.
  • Interest Rate Type: Mortgages have adjustable or fixed interest rates. In a fixed rate mortgage, the monthly payments remain the same over the life of the loan. Adjustable- rate mortgages usually have lower initial interest rates, but the payment will vary each period as the market changes.
  • Points: Mortgage points, also known as discount points, are upfront costs paid directly to the lender in exchange for a lower interest rate. Paying for points is often a good choice for people who plan to live in their home for a long time.

Baltimore County Employees Federal Credit Union offers mortgages for purchase or refinance with competitive rates and no hidden fees!

If you’re looking for a mortgage or have questions about current loan rates, talk with one of our Mortgage Counselors at 410-828-4730 or mortgages@bcefcu.com.

We’ll be happy to explain the process and help you find the right loan!