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Updated by Fusion 360 on Dec 04, 2014
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Fundamental Factors That Determine Mortgage Rates

Few are the people who can pay for the entirety of a home upfront without having to apply for a mortgage. For the rest of us, dealing with mortgage companies, loan qualification and the search for a fair mortgage rate can be difficult. However, that being said, knowing the ins and outs of the very factors that determine the financial commitment that you’ll make to your mortgage — monthly rates — can help deal with the enduring of such a fiscal responsibility.

Credit Score

More than just about anything, credit score determines the interest rate offered on your mortgage by a lender. The best rates are almost always offered to those with a credit score nestled comfortably between 760 and 850.

The Federal Reserve

Though indirectly related, whenever the Federal Reserve invests in long-term U.S. Treasury securities or debts to help strengthen its struggling economy, mortgage rates show a tendency to decline. In 2010, during the widespread global economic crisis, interest rates plummeted to a meager 4.5 percent.

Loan Type

Generally speaking, fixed-rate mortgages are ideal for homeowners in that they provide payment constancy, regardless of future economic dilemmas. As a riskier option, some go for adjustable-rate mortgages which come with changeable interest rate provisions built into their contracts.

Job History

For mortgage companies, the ideal candidate has managed to stay employed for an uninterrupted span of at least two years and has been working at the same job — or at least in the same industry — for a number of years. Due to the questionable state of America’s economy, as of late, money-lending companies want to see a stable job history.

Income vs. Monthly Expenses

Though the cloud of assumed uncertainty and deception hangs over the heads of most mortgage companies, the reality of the situation is that they truthfully want to help people. Half of that battle is making sure that people don’t get involved with payments that they’re going to have difficulty keeping up with. For this reason, liabilities should never exceed 40 percent of an applicant’s gross income.




Equity is the difference between the market price of a potential home and what you owe on your mortgage. For lower rates, your equity will need to be 20 percent or more of the market value of the home in question.

Down Payment

Simply put, a hefty down payment equates instant equity, which — in turn — minimizes a lender’s risk. Furthermore, regardless of the state of your financial past, an impressive down payment indicates to a mortgage company that you are disciplined with your personal funds.




Lucas Miller is a finance writer. Information provided by Castle and Cooke Mortgage (NMLS #1251). writer for Fusion 360, an advertising agency in Utah. Find him on Google+.

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