What Determines My Mortgage Rate?

I have found the above subject to be quite relevant considering the fact that mortgage rates have dipped back down to near record lows. I have been asked time and again as to what influences the rate they (clients) receive on a mortgage. You simply cannot go off "advertised" rates anymore because there are so many "assumptions" in qualifying for that rate. I have taken the liberty of outlining some of the factors that help determine your rate and a brief outline as to why. Keep in mind that mortgage rates like many others are tied to risk, so the riskier the loan is for the bank the higher the rate of return they want on their investment.

#1: Credit Score: This is the MOST important factor in determining your rate on a mortgage. The higher the score; the lower the risk and hence the lower the rate. Vice versa for a lower score; more risk and hence a higher rate.

#2: Loan-to-Value: Is the bank lending a 100% of the properties value? Are they lending 95%, 80% or 90%? The lower the (ltv) typically the lower the rate you will qualify for (to a certain point)!

#3: Income & Asset Documentation: Can you document your income and asset via W2's, pay stubs, bank statements and 401K? Or are you a 1099' self-employed contractor? Again, the more documentation that you can provide to justify your financial position the better the rate will be.

#4: Credit Report: Do you have a great score but have filed for Chapter 7 bankruptcy within the last 2 years? Do you have judgements, collections or charge offs. Do you have a reposession or "spotty" lates within the last year. What kind of debt are you carrying (i.e. credit cards, unsecured loans, pay day loans, etc.)? Your overall credit portfolio will impact the banks decision on rate.

#5: Collateral: Is the home you are purchasing a double wide on piers on 12 acres? Or is it a "stick built" home in a subdivision? Are you purchasing a "working farm" or a modular home? Is the home "unique" in any way? The home in which you decide to purchase could have an impact on the type of loan you qualify for and in turn the rate associated with that product.

Hope this information helps shed some light on the determining factors associated with mortgage rates. When you here 5.0% on a 30 year fixed be careful; do you fall within that box? More times than not the answer is NO but the lender got you to call and that is their goal.

Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker