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What determines my rate of interest?

There are several factors that come into play when determing interest rate. For the most part, rates will be roughly the same from lender to lender or within a quarter of a percent. When it comes to rate keep the following things in mind.

1. What is my credit score?

Typically there are adjustments for credit scores below 720. There may be different adjustments for scores between 620-660, 660-680, etc.

2. What is my loan-to-value?

Lenders set their rates based on risk. One of the key factors in figuring the risk is your loan-to-value. How much do you have invested in the transaction? If you are buying a home, the less money you put down, the higher the risk.

3. What is my loan size?

Banks are in business to make money. The smaller loans net them less money and in turn they make up for this by charging a higher rate. The sweet spot for banks is an amount between $100,000 and $400,000. This range gives them the most bang for their buck.

4. How much is my loan originator making?

Wether you are working with a mortgage broker or a bank loan officer, chances are they are making the bulk of their money from the interest rate they lock in for you. A mortgage broker can often times get best overall deal for you by shopping for the best rates and fees.

5. What is happening in the bond market? 

Mortgage rates are loosely based on the US Treasuries bond markets. We general follow the 10-Year T-Bill bond. When investors put their money into these bonds, we normally see the yields go down. Interest rates usually follow. When investors feel stocks are a better bet, we normally see interest rates rise. Rates can and do change several times in a day. It is important to know this when shopping for a loan. The rate you are quoted in the morning may be different in the afternoon. Most lenders can't lock an interest rate until you've signed a loan application and have a property address.

To discuss your particular scenario or for a quick loan approval, call me today!