Simple Checklist of Factors Influencing your Mortgage Interest Rate

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When you are out house hunting one of the terms you are going to hear more than any other is mortgage interest rates and for good reason. It is on of the factors that determine how much you will be paying for your dream home. In order to understand how it works, you'll need to know what an interest rate is and how they decide upon it.

First off, the interest rate is the amount received in relation to an amount loaned. It is normally given as a percentage of dollars received per hundred dollars lent. Mortgage interest rates reflect the time for which the money is on loan, the risk that it may not be repaid, and the current supply and demand for funds available to lend. There are a number of different factors that influence mortgage rates. Here are a few:

• Timing - I'm sure you are aware that interest rates change daily. If a lender locks in a rate for a longer period of time the better it is for you if the market moves against them. You will end up paying more in points to get locked into a longer term guarantee but it pays off if you get locked in at a good rate and then interest rates increases. However, if you are set at a long term rate and the market decreases, you may be better off floating your interest rate. This way you can you can take advantage of a shorter lock-in period, and in turn, saving you money.


• Points - Points are costs worked into your mortgage paid up front rather than being put into your interest rate. Each is equal to one percentage point of the total amount of your loan. By paying extra points in the beginning of the process you can save yourself some money in the long run by receiving a lower mortgage interest rate.


• Credit and payment history - A less-than-perfect track record may make you seem like a high credit risk, which means you'd only be eligible for higher mortgage interest rate loans. If you find yourself in this position we may still be able to help you.


• Debt-to-income ratio - This is defined by lenders are monthly debt obligations such as credit card bills calculated against your current income. If you find yourself having a higher debt to income ration then expect to pay a higher interest rate on your home mortgage.


• Type of property - You may overlook this fact but the type of home you plan on buying plays a big role in the amount of interest you end up paying. A loan for a single family home is less risky for a lender to approve that a multi-family home, for example. The less of a risk you and the property are, the better the rate you are approved for.


• Loan amount - This is probably the most obvious reason on this list but just as a reminder, I'll rehash it. The interest rate you are approved for is often determined by the amount of money you plan on borrowing.

Countrywide Credit offers credit tools and calculators, mortgage refinancing, consolidation loan, and a comprehensive credit learning center to help educate consumers on credit-related topics. Visit us at www.countrywidecredit.com