What Goes Into A Rate?
Mortgage pricing is nuanced. Here's what actually goes into the rate a borrower receives:
1. Market Conditions
Rates move based on the bond market—specifically, mortgage-backed securities (MBS).
Just like stocks and gas prices, mortgage rates fluctuate based on economic data, inflation, Federal Reserve policy, and investor activity.
What this means for you: The market might shift between the time you get pre-approved and when you lock in.
2. Loan-Level Factors
Pricing adjusts based on the characteristics of your loan.
The same market rate can lead to different offers depending on:
- Your credit score
- Your loan amount
- Occupancy (primary, second home, or investment)
- Property type (condo, multi-unit, manufactured home, etc.)
Why this matters: Even a small change like improving your credit score can result in better terms.
3. Loan Program
Conventional, FHA, VA, USDA, and other specialty products all price differently.
Each loan type is backed by different agencies or investors, which impacts the rate structure. Some programs may offer lower rates but have additional fees or stricter requirements.
Pro tip: The “lowest rate” isn’t always the best fit. Pick your loan program based on the big picture—rate, cost, and qualification.
4. Lock Period & Lender Margin
Rates are tied to how long you lock and how your loan officer structures pricing.
Most loan officers offer rate locks in 15-, 30-, 45-, or 60-day increments. Longer locks usually cost more because they carry more risk. Lenders also apply margins based on their business model and cost structure.
What to know: A short lock can sometimes lead to better pricing.
Bottom Line: Rate Is a Formula, Not a Flat Number
The advertised rate you see online is often a starting point, not an exact quote. The best rate for your buyer depends on their scenario, and I can help optimize the structure to get the most competitive offer.
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