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Learn what factors determine your mortgage interest rate
Consumer Affairs

Learn what factors determine your mortgage interest rate


The U.S. Consumer Financial Protection Bureau published Jan. 20 “7 factors that determine your mortgage interest rate” (available at

The article seeks to help consumers understand factors that determine mortgage interest rates and provide consumers with an interactive tool allowing them to estimate “what rates you can expect.”

The factors affecting rates include not only a personal credit score, but also the location of the property (e.g., the state the property is located in or whether it is in a rural or urban location) and the amount intended to be borrowed (generally, “you’ll pay a higher interest rate on that loan if you’re taking out a particularly small or particularly large loan”).

Generally, the higher the down payment paid the lower the interest rate charged. Also, shorter loan terms mean lower mortgage rates and “lower overall costs.” Still, you may find “higher monthly payments” with short-term loans.

The mortgage type chosen can affect the rate. Fixed-term loans tend not to change over time and adjustable rate loans have variable rates. As a result, rates are generally lower initially on adjustable-rate loans, but the rates “might increase significantly later on.”

Also, the interest rate for conventional, FHA, and VA loans can vary.

To help determine loan rate impact, explore the CFPB’s interactive tool found at

Opinions are solely the writer's. Joseph Pellicciotti is a lawyer, professor and vice chancellor at Indiana University Northwest.


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