What Variables Can Affect Your Interest Rate

Today Jasmin and Aldo are going to talk about interest rates and what kind of variables affect them, but most importantly, why would one person get a 4.5% interest rate, and then another get a 4.25? 

The biggest variables with interest rate pricing are going be credit, it's going to be your down payment, it's gonna be the loan program, it's gonna be the terms of the loan, so whether that's a 30 year fixed, a 15 year fixed, an ARM loan which is an adjustable-rate mortgage, there are a lot of variables that go into that.

When a client meets with a lender there is something called points which are a percentage of your loan amount, so one point would equal 1% of your loan amount. An example would be a 300k loan, one point of $300,000 would be $3,000. So that $3,000 would be paid at closing to lower your interest rate.

Another important variable is points, however, they are very situational depending on how long the client stays in their home. For example, lenders will look at the difference in the monthly payment, and we'll see how many months it will take to recoup that initial investment back, $3,000. Because that $3,000 points that you paid is actually an investment to buy down that rate. So lenders find that break-even point, and then they tell clients, "Hey, if you plan on staying "in your house over seven years, "then buying down your interest rate makes sense." But there are some cases where it may not make sense for everyone.