What Determines Your Interest Rate?

There are many factors that determine your interest rate when purchasing or refinancing a home. Ever wondered why you see low rates advertised but once you've gone through the application process, your rate is different? Well, you are not alone; many homebuyers and homeowners get confused when their interest rate comes back higher than what was initially advertised. There are many variables in assessing your mortgage rate. Some of the most important variables are explained below.
  • Credit score
  • Type of property you are purchasing or refinancing
  • Down payment
  • Debt to income ratio
  • Employment history
  • Term of the loan
  • Loan amount
  • Loan to value ratio
  • Location

What is an Interest Rate?
The interest rate is a percentage of the loan amount that is charged for borrowing money. 


 What is an APR?
The Annual Percentage Rate is the total cost of the loan. You take the interest rate and add on the lender fees required to finance the loan to calculate your APR. It is typically higher than the interest rate because it includes the fees. 


The Difference Between Your Interest Rate & Your APR
Think of the interest rate as a 'starting point' of what you will pay for a mortgage loan. Once you tack on the associated fees, you have your actual APR.

Source: Susan Ferris, Loan Officer NMLS-217468
Cobalt Mortgage Inc., NMLS-35653
18545 Sigma Rd. No. 105 San AntonioTX 78258
Phone: (210) 538-0061