Credit score and credit history: Lenders look to credit scores and credit histories as a snapshot of your financial health

Credit score and credit history: Lenders look to credit scores and credit histories as a snapshot of your financial health

A: Baseline mortgage rates are determined by the market, not individual lenders. Ironically though, the final rate that youll end up paying in interest isnt actually the baseline one.

Your lender will determine the final interest rate that you will pay based on several factors that are weighed alongside the baseline, including:

These touchpoints help them determine if youre perceived to be a responsible borrower, and how likely you are to repay any sums that are lent. But your credit score isnt necessarily determined by your annual income and the amount of money that you keep in an investment account. Rather, its a reflection of several factors, including your past ability to maintain and repay credit. Bearing this in mind, a track record of late or missed payments, high utilization, a short credit history, or not enough diversity in your portfolio can negatively impact your credit. Therefore, a low score indicates that youve had trouble in one or more of these areas, signaling that you may be a high-risk borrower.

Home price and down payment: The lower the amount of the purchase price of your home, and the lower the amount that you are seeking to borrow, the lower the level of risk that you present from a lenders perspective. If the home price is low or you pay a hefty down payment (or both) that brings down your principal balance, you wont have to borrow as much money, making a loan less risky in financial institutions eyes potentially leading to a better interest rate as well.

A: Mortgage rates fluctuate daily during the 5-day workweek. They can hold steady from month to month or can shift due to market changes and economic concerns. In the past 20 years, the moments we’ve seen that have driven the largest shifts in mortgage rates generally have to do with recessions. Historically, greater economic uncertainty leads to lower mortgage rates.

A: Although 15-year fixed mortgage interest rates are always changing, as we noted earlier, there are a few key factors that distinguish a good 15-year interest rate from one thats not as compelling.

In addition, dont forget that daily rates which are posted are averages and whatever rate you’re actually offered will depend on factors like your actual credit score, credit history, and debt-to-income ratio.

That being said, a good 15-year fixed rate is at or below the daily average. It typically hovers around 0.5% 0.75% lower than its 30-year counterpart. Worth noting: Over the past 10 years, 15-year fixed-rate mortgages have averaged between 3.0 4.0%.

The Bottom Line

As noted above, 15-year mortgages typically offer lower interest rates than conventional 30-year home mortgages and other home loan products with longer repayment periods. But at the same time, they also tend to come with higher monthly fees attached and ounts.

Current 15-year mortgage rates are determined by baseline market averages, which are then cross-referenced by lenders, who amend them based on different variables before extending borrowers an actual interest rate offer. These variables may include, but are not limited to, a borrowers personal credit score, credit history, debt-to-income (DTI) ratio, the location of the home, the propertys purchase price, and other factors.

Obtaining a 15-year fixed-rate mortgage can help you build equity in your home faster, pay off your mortgage quicker, and enjoy far greater savings over the total life of the loan. However, if you apply for or refinance to one, you can also expect to be making larger monthly payments and tying more money up (that could otherwise be invested elsewhere) from each paycheck.

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