Your mortgage rate is determined by several factors: your credit score (higher score = lower rate), down payment size (larger down = lower risk), loan type (FHA, VA, Conventional have different rate structures), property type (condos and investment properties cost more), and market conditions (economic data, Fed policy, bond yields). A 740+ credit score with 20% down on a conventional loan typically gets the best rate.
How Your Credit Score Affects Your Rate
Credit score is one of the biggest factors. A score of 760+ gets the best rates. A score of 700-759 gets slightly higher rates. A score of 620-699 gets significantly higher rates. A 50-point difference can mean 0.25-0.5% higher rate. Improving your credit score before applying can save thousands over the life of the loan.
How Down Payment Affects Your Rate
Larger down payments mean lower risk for lenders. 20% down eliminates PMI and typically gets better rates. 3-5% down (FHA or conventional) means higher rates and mortgage insurance. 10% down is a middle ground. The exact impact varies by lender and loan program.
How Loan Type Affects Your Rate
FHA loans: typically lower rates but require MIP (mortgage insurance premium) for the life of the loan. VA loans: often the best rates available with no down payment required. Conventional loans: competitive rates for qualified buyers. USDA loans: competitive rates for rural buyers. Each type has different pricing based on risk.