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What Factors Are Used To Determine My Mortgage Rate?

By Eric Goodwill

Several factors are used by Mortgage Companies to determine how much interest to charge. Market conditions and personal finances are major factors.

The prevailing mortgage market affects all mortgage interest rates. If there is high demand for mortgages, interest rates will be higher. The high demand makes mortgage funds more valuable so the mortgage companies charge higher interest rates for better profit. Higher interest rates also help discourage marginal borrowers from applying and driving the demand so high there will not be enough liquidity to keep the markets functioning on an efficient and effective basis.

Besides supply and demand, what other market factors influence mortgage interest rates?

Inflation is another factor affecting interest rates. When the economy is strong and people have more money to spend, prices on most goods and services will rise. If inflation gets too high, the Federal Reserve Board will act to slow it down. They do this by raising the federal funds rate, the rate charged for overnight loans between banks. This rate increase will have a domino effect and cause all interest rates to rise, including mortgage interest rates.

What is the most important personal factor influences interest rates?

A prospective borrowers Fair Isaac company (fico) credit score is used by most mortgage companies to determine the potential eligibility for a mortgage and the interest rate. The fico score is determined by a review of the credit history with the 3 credit reporting companies. The higher the score the better the chances someone will get a mortgage with a reasonable interest rate.

What other personal factors influence interest rates?

Mortgage companies look at earnings and work history, previous credit history and bankruptcy. Since many mortgages are 30 year contracts, mortgage brokers want financial stability with the mortgage payments no more than 30% of income.

Related posts:

1. What Factors Determine Mortgage Rates?
2. How Do I Influence My Mortgage Interest Rates?
3. What Factors Affect Mortgage Rates?
4. What FICO Score Gets You The Best Mortgage Rate?
5. Does Having A High Credit Score Decrease My Mortgage Rate?

One Response to “What Factors Are Used To Determine My Mortgage Rate?”

1. keen says:

   April 8, 2010 at 10:10 pm

   very important article.use full for all mortgage marketers new and old.i got many ideas about mortgage market section more..