When you are applying for a loan there are many different things that can affect the mortgage rate you are offered. And a lot of these have to do with what your home buying abilities are. The first thing that affects your rate is the amount of money you can put down on your home. A down payment of 20% is the standard. If you put down less than this your rate will be higher. If you put down more, your rate will be lower.

The amount of the loan you take out is also a factor. Freddie Mac and Fannie Mae have loan limits for conforming loans. If you are trying to borrow more than this limit then your mortgage rate will increase.

Another factor is the length of the loan. If you have a longer loan your rates will be higher and a shorter loan gives you lower rates. However, even though your rate is lower with a shorter loan your monthly payments may still be higher.

Your credit score and history is also a factor, which makes sense. If you have better credit then you are less of a risk and borrowers will reward you with a lower rate. Along this line your income level is also important. If you make more money than you have in credit obligations then you’ll also be offered a better mortgage rate.

The final aspect of your mortgage rate is the closing costs associated with your home. If you can’t afford to pay all of the closing costs then you will likely have a higher mortgage rate. If you can afford to pay these costs it’s always a better idea to do so, rather than letting the lender pay them.