Interest rate is determined by various factors, such as the following:

• Credit: This is obvious enough – the better your credit is, the better interest rate you will receive. If you are worried about credit, get in touch with me as soon as possible so that we can review credit and start working on any controllable improvements to raise the score.

• Loan-to-Value: The more money you put down, the better your interest rate will be (to an extent).

• Term: The shorter your loan term is, the better your interest rate will be. For example, the interest rate on a 15-year loan will be better than 30-year loan.

• Purpose: The type of purchase makes a difference – primary homes have the lowest rates and investment properties have the highest.

• Property Type: Single family/primary homes have the lowest interest rates. Rates are adjusted upward for condo’s, attached condo’s, and high rise condos. 

• Lock Period: When a buyer finds the interest rate they want, they secure it by “locking” it in. The longer you lock a rate in before closing, the more expensive it is (this falls under “points”). If you lock a rate at 60 days before closing, you’ll be paying more for that rate than if you lock it in at 15 days before closing. On the other hand, you are also risking interest rates rising by waiting. The longest your buyer will likely ever lock a rate in for is 60 days.
  • For this reason, you don’t want your buyer to find a loan officer based on interest rate. The rate from the time the clients gets pre-approved to the time they go under contract will be different. You want the clients to be prepared to close regardless of interest rate, not set up for failure because they were pre-approved based on an unattainable rate.