There are several factors that can influence the cost of your home mortgage rate. Different types of home loans, changing market conditions, your home’s value, and other factors will all affect your mortgage rate.

How Rates are Determined

Mortgage rates are influenced by multiple factors, including the status of the economy, the bond market, borrowers’ credit scores, and borrowers’ down payments (to name a few). In a healthy global or national market, rates tend to increase. In a less-than-ideal market, they tend to decrease.

While you may not be able to control the market or the economy, you can control your down payment amount and your credit score. Lending companies adjust their base interest rates by considering the risk of lending to a borrower and the economy. Based on the perceived risk levels, lenders will adjust their rates accordingly.

Hot Tip

Your best bet at lowering your interest rate is to maintain a high credit score and put down a high down payment.

Decide what you want most in a home

Mortgage rates can vary by loan type and category. Here's a quick rundown.

Conventional Loans

Serviced by private mortgage lenders such as banks and credit unions, conventional mortgages:

Include conforming, non-conforming, and jumbo loan types.
Can have a down payment as low as 3%.
Typically require private mortgage insurance (PMI).
Often require a higher credit score.

Highlights:

Borrowers can often catch a break on their rate through a conventional loan because they're considered lower risk.

FHA Loans

Determine how much home you can afford without breaking your budget.

Insured by the Federal Housing Administration (FHA).
Guaranteed by the Department of Veterans Affairs (VA).
Guaranteed by the U.S. Department of Agriculture (USDA).

Highlights:

These loans can have low mortgage rates and low down payment requirements, but lenders can increase the mortgage rates if they feel there’s a higher risk.

Fixed-Rate Mortgages

Fixed-rate mortgages have one set interest through the life of the loan.
The monthly principal and interest payments don’t change until the debt is paid off.

30-Year Fixed Rate Mortgages

The most common mortgage term.
Has smaller monthly payments.
Higher interest over the life of the loan.

Adjustable-Rate Mortgages (ARMs)

The interest rate can fluctuate over time.
Usually starts at a lower interest rate but can increase as time passes.

15-Year Fixed Rate Mortgages

Popular for refinancing.
Has larger monthly payments.
Will save you more on interest over the life of the loan.

Highlights:

The shorter the mortgage term, the lower the mortgage rate will tend to be. Borrowers can set their terms based on their financial situations.

Home Loan Interest Types

Interest is the calculated amount of the cost you have to pay to borrow money from a lender. This is usually expressed as a percentage of the amount you’ve borrowed. Here are the different types of interest structures you should know about:

Home Loan Interest Types	Features
Simple Interest	Calculated as a percentage of the full principal amount borrowed. Doesn't change over time.
Compound Interest	Calculated using the principal amount borrowed and accumulated interest added by every period. Interest increases over time.
Fixed Interest	Rate doesn't change over time. Is favored by borrowers who don't want any surprises. Can be higher than other types of interest rates due to lack of variables.
Variable Interest	Fluctuates over time based on changes within the market or an index. Can be impacted by your credit rating and down payment amount, among other factors.

APY vs. APR

Annual Percentage Yield (APY)

The actual rate of return earned in a year based on compound interest.
By paying a higher balance, borrowers can expect a larger annual return.
Tends to be higher than the APR.

Annual Percentage Rate (APR)

A measurement of a loan's cost per year measured by simple interest.
Combines interest amount, additional fees, points, and PMI payments.

Find a Personalized Mortgage Rate

Your personal mortgage rate will depend on multiple factors, a few of which include:

The home's value
The down payment
The loan amount
The length of the loan
The interest rate

Annual taxes
Home insurance rates
Private mortgage insurance rates
Your credit score
Your employment status

At Caliber Home Loans, Inc., we're dedicated to providing you with the most up-to-date technology out there. And our calculators are seriously awesome! Find your personalized mortgage rate in minutes here.