When you’re buying a home, a lot of things can feel out of your control — like the market, inventory, or even how fast homes are selling.
But one thing you can influence? Your mortgage rate.
Understanding what affects your rate can help you make smarter decisions and potentially save thousands over the life of your loan.
Let’s break down three major factors that come into play:
1. Your Credit Score
Think of your credit score as your financial report card — and lenders definitely look at it closely.
The higher your score, the more trustworthy you seem to lenders, and the better your chances are of locking in a lower interest rate.
If your score is on the lower side, don’t panic. It’s never too late to work on improving it. Paying bills on time, paying down debt, and avoiding new credit inquiries can all help boost your score over time.
Pro tip: Even a small jump in your credit score could make a big difference in the rate you’re offered.
2. Your Loan Type
Not all loans are created equal. Different types of loans — like conventional loans, FHA loans, VA loans, and USDA loans — all come with their own guidelines and interest rates.
For example:
- Conventional loans might offer better rates if you have strong credit.
- FHA loans can be more accessible for buyers with lower credit but might come with slightly higher rates or extra insurance costs.
- VA loans (for eligible veterans and service members) often offer fantastic rates with no down payment required.
Choosing the right loan for your situation is key to getting the best possible deal.
3. Your Loan Term
Here’s something many buyers don’t realize right away:
The length of your loan — or your “loan term” — affects your rate too.
Typically, shorter-term loans (like 15 years) come with lower interest rates compared to longer-term loans (like 30 years).
The tradeoff? Your monthly payment will usually be higher with a shorter loan since you’re paying it off faster.
But over time, you’ll pay way less in total interest.
It’s all about finding the right balance between what you can afford monthly and what makes sense long-term.
When it comes to your mortgage rate, you have more power than you think.
By understanding your credit score, loan type, and loan term, you can make informed choices that put you in the best financial position possible.
Thinking about buying soon?
Now’s a great time to chat with a lender or real estate professional and start putting your best foot forward.
Because the right moves today could mean serious savings tomorrow.
