What’s your mortgage rate?

By Emily Wilson, President and Broker of Heritage Financial

This is the most frequently asked question when someone is shopping for a mortgage, and rightfully so. We all want to save money. Shopping your interest rate is smart, but there’s much more that goes into it than simply asking “what’s your rate?”

There are many factors that determine the interest rate you’ll receive on your next mortgage. You’re not likely to receive exactly the same terms that your friend Joe did on his refinance, or what Marie just locked in on her new townhome purchase. For example, if you have bad credit and a low down payment or limited equity, expect a higher rate than someone with a flawless credit history and large down payment.

  • Here is a list of attributes that impact the mortgage rate you ultimately receive:
  • Credit score
  • Loan amount: Conforming vs. jumbo
  • Down payment (for a purchase) or equity levels (for a refinance)
  • Purpose of the transaction: Purchase vs. refinance
  • Type of loan: Fixed vs. adjustable rate
  • Disposition of the property: Primary residence, vacation home, or rental property
  • Type of property: Single family residence, multiple units, condo, manufactured, or mobile home
  • Length of rate lock: Most rate lock periods are offered in 15-day increments, the average being a 30-day lock. Need longer? Expect to pay more.
  • How much you can or are willing to pay for closing costs. If you need a low or no-cost loan because you have limited funds for closing, you’ll pay a higher rate than someone who has allocated sufficient funds for closing costs.

Beyond your financial profile, where you shop is also important. Mortgage brokers can often offer more flexibility and options than a bank, giving you more to choose from under one roof. Be sure to discuss your long and short-term goals of the purchase with your loan advisor. Is this a stepping-stone house that you’ll surely outgrow in a few years, or is this your rocking chair house where you’ll grow old and feed the birds? These things matter when choosing the right interest rate. Buying down your interest rate makes more sense for long-term investments, but would be a grievous waste of money on a short-term home.

There is no single answer, but the more time you put into improving your financial position and familiarizing yourself with the process in order to effectively negotiate, the better off you’ll be.