12 Variables That Affect Your Mortgage Interest Rate

Every transaction type and borrower’s individual financial profile can influence their borrowing costs. The following variables are used by lenders to determine a borrower’s mortgage interest rate:

1. Property Use

Primary residences typically have the lowest interest rates when compared to second homes and investment properties.

2. Property Type

Single-family homes and condominiums with 25% or more in a down payment or equity have lower interest rates than condos with less than 25% down, multi-family dwellings, and co-ops.

3. Credit Score

In general, borrowers with higher credit scores receive better interest rates than those with lower scores. A borrower with an 800 mid-score might have a rate as much as 1.5% lower than a borrower with a 640 mid-score.

4. Down Payment

In many cases, a larger down payment (30-40%) can lead to a lower interest rate.

5. Discount Points and Origination Fees

Borrowers can pay discount points and origination fees to buy down their interest rate. Loans with discount points are lower than zero-point options.

6. Loan Term

Shorter-term, fixed-rate loans have lower interest rates than longer-term programs. For example, 15-year fixed-rate loans have lower rates than 30-year fixed-rate loans. In certain interest rate markets, Adjustable Rate Mortgages (ARMs) also have lower rates than 30-year fixed-rate loans.

7. Loan Amount

Conforming loan amounts have the lowest interest rates. These are the average rates that Fannie Mae and Freddie Mac publish weekly. High Balance conforming loans vary depending on the county the property is located in, and tend to have higher rates than conforming loans. Loans in excess of the Fannie Mae High Balance loan limit are considered jumbo mortgages. Jumbo interest rates can be equal to or higher than the High Balance conforming rates. Even though smaller loan sizes are still considered to be conforming loans, loan amounts under $150,000 can have higher interest rates when compared to a $400,000 loan.

8. Loan Types

Conforming FHA, VA, USDA, and 203K loans all have different interest rates.

9. 1st and 2nd Combo Loans (Piggybacks)

Loans with a concurrent 2nd mortgage can have higher rates than a loan with 20% down or a loan with private mortgage insurance (PMI).

10. Rate Lock Period

Interest rates can be “locked-in” or guaranteed for a period of time to coincide with the closing date. Rate-lock periods can vary from 30 to 60 days. Certain parts of the country close home purchases in under 30 days, where other parts of the country see periods of 60 days or longer from contract to close. Typically, the longer the lock period, the higher the rate or fees. Refinances tend to be locked for 45-60 days, and purchase loan lock periods vary depending on the location of the property.

11. “No Cost” Refinances

There’s no free lunch in America. No-cost refinances have higher rates than refinances where the borrower pays the customary closing costs.

12. Purchase-Money Mortgages, Rate-and Term Refinances, and Cash-Outs

Purchase-money mortgages have lower interest rates than rate-and-term refinances. When borrowers increase their loan amounts or consolidate a first and second mortgage, this is deemed a cash-out refinance. Cash-out rates are usually higher than rate-and-term refinances. All of the above factors influence a borrower’s interest rate. Reliable lenders won’t offer you a one-size-fits-all interest rate when recognizing that everyone’s financial situation is unique.

< Older Post

Newer Post >

Rates Are Trending Downward: How to Pick the Best Strategy for Your Home Financing

September 17, 2025

As interest rates are trending downward, this shift is opening the door to new opportunities to lower monthly payments, consolidate debt, or tap into home equity.

New Federal Law Bans Abusive Use of Trigger Leads

September 8, 2025

In March 2026, the Homebuyers Privacy Protection Act will put an end to the unwanted solicitations many buyers receive after submitting a mortgage application.

10 Benefits of Working a Part-Time Job as a Student

September 3, 2025

Back-to-school season is here. Many Gen Z students are benefitting from a part-time job during the school year.

Should Your Mortgage Be Part of Your Retirement Strategy?

August 27, 2025

Mortgage strategies for retirement planning, including refinancing for retirement and more.

Refinances Are Up 23%: Is Your Mortgage Working for You?

August 21, 2025

Refinances currently account for 46.5% of all mortgage activity. Is your home loan working for you? More homeowners are taking a strategic, big-picture approach to their finances—and home equity is playing a big role in that shift. With high-interest debt, rising living costs, and growing home equity balances, many of

Your Guide to Down Payment Assistance Programs and Low Down Payment Options

August 14, 2025

Your down payment doesn't need to be a dealbreaker. Whether through local down payment assistance programs or federal loan options like FHA, VA, or USDA loans, there are multiple paths to affordable homeownership in 2025.

How to Buy a New Home Without Selling Your Current One First

August 7, 2025

Looking to buy a new home before selling your current one? Most people think of a HELOC as a second mortgage or a way to tap into equity of your current home; however, another strategy for HELOCs is to use it as a bridge loan to secure a new home before selling your current one.

12 Variables That Affect Your Mortgage Interest Rate