Mortgage Rate FAQs
Demystify rates, locks, and lender pricing so you can secure the best deal for your situation.
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Rate Basics
Understanding how mortgage rates work
The interest rate is what you pay to borrow money, while APR (Annual Percentage Rate) includes the interest rate plus certain fees spread over the loan term. APR gives you a more complete picture of the loan's cost but doesn't include all closing costs. When comparing loans, look at both the rate and APR.
Mortgage rates can change multiple times per day based on bond market movements. Major changes often occur after economic reports (jobs data, inflation, Fed meetings) are released. This is why the rate you see online might differ from what you're quoted - always get a current personalized quote.
The Federal Reserve sets short-term rates that banks charge each other, while mortgage rates are long-term rates based on bond market yields. While Fed policy influences mortgage rates indirectly, they don't move in lockstep. Mortgage rates more closely follow the 10-year Treasury yield.
Scores of 740 and above typically qualify for the best rates. Every 20-point drop in score can increase your rate by 0.125-0.25%. Conventional loans price in 20-point tiers (740, 720, 700, etc.), while government loans (FHA, VA) are less sensitive to score differences.
While base rates are set by the market, you can often negotiate on points, lender credits, and fees. Shopping multiple lenders gives you leverage. We do this work for you by comparing multiple wholesale lenders to find your best combination of rate and fees.
Rate Lock Questions
Protecting your rate through closing
A rate lock guarantees your interest rate won't change between approval and closing, protecting you from market increases. Standard locks are 30-45 days, with longer periods available. Once locked, your rate is protected even if market rates rise, though you typically can't benefit if rates fall unless you have a float-down option.
Lock your rate when: 1) You're satisfied with the rate offered, 2) You have an accepted purchase offer or are ready to start a refinance, 3) You can close within the lock period. Don't try to time the market perfectly - if the rate works for your budget, locking provides certainty.
If your lock expires before closing, you'll need to extend it (usually for a fee) or accept the current market rate. Extensions typically cost 0.125-0.25% of the loan amount per week. To avoid this, ensure your lock period covers expected closing time plus a buffer for delays.
Rate locks are lender-specific and non-transferable. If you switch lenders, you'll need to lock again at current market rates. This is why it's important to shop and compare lenders before committing to a lock, not after.
A float-down allows you to lower your locked rate if market rates drop significantly (usually 0.25% or more). This option typically costs 0.5-1% of the loan amount upfront or can be built into a slightly higher rate. It's insurance against missing out on falling rates.
Getting the Best Rate
Tips and strategies for better pricing
To get the best rate: 1) Improve your credit score above 740, 2) Make a larger down payment (20%+ avoids PMI), 3) Lower your debt-to-income ratio, 4) Consider paying points if you'll keep the loan long-term, 5) Shop multiple lenders, 6) Consider different loan terms (15-year rates are lower than 30-year).
Paying points makes sense if you'll keep the loan long enough for monthly savings to exceed the upfront cost. Calculate your break-even point: divide the cost of points by monthly savings. If you'll keep the loan past this point (typically 5-7 years), points can save money long-term.
Online advertised rates often show best-case scenarios and may not include all costs. They might assume perfect credit, 20% down, and paying points. Always get a personalized Loan Estimate that shows your actual rate and all associated costs based on your specific situation.
Advertised rates assume ideal qualifications that may not match your profile. Your actual rate depends on credit score, down payment, loan amount, property type, location, and other factors. This is why personalized quotes are essential - they reflect your actual qualifications.
Rates generally rise when the economy is strong (increasing inflation concerns) and fall during economic uncertainty (flight to safety in bonds). Major influences include Federal Reserve policy, employment reports, inflation data, and global events. However, timing the market is difficult - focus on what works for your situation.
Get your personalized rate quote
See exactly what you qualify for based on your unique situation.