"What's your rate?" is usually the first question people ask me. And I get it — the interest rate on your mortgage is one of the biggest financial decisions of your life.

But here's what most people don't realize: mortgage rates aren't set by your lender. They're set by the market. Your lender is just the middleman.

Understanding what actually drives rates — and what you can do about it — will make you a much smarter borrower.

📈 The Big Picture: What Drives Mortgage Rates?

Mortgage rates are primarily driven by the bond market, specifically the yield on 10-year U.S. Treasury bonds. When Treasury yields go up, mortgage rates tend to follow. When they fall, mortgage rates usually fall too.

What moves Treasury yields? A lot of things:

• Inflation: Higher inflation = higher rates (investors demand more return to compensate)
• Federal Reserve policy: The Fed doesn't set mortgage rates directly, but its decisions on the federal funds rate influence the broader interest rate environment
• Economic strength: A strong economy tends to push rates higher; a weakening economy tends to push them lower
• Global events: Geopolitical uncertainty often drives investors toward the safety of U.S. bonds, which can push yields — and mortgage rates — down

None of this is in your control. What is in your control is how you position yourself to get the best rate available to you.

🧮 The Factors You Can Control

📊 Your Credit Score

This is the single biggest lever you can pull. Lenders use risk-based pricing, which means borrowers with higher credit scores get lower rates.

Here's a rough illustration of how much your score can affect your rate on a $300,000 30-year loan:

• 760–850: Best available rate (let's say 6.5%)
• 700–759: ~0.25% higher
• 680–699: ~0.5% higher
• 660–679: ~0.75% higher
• 640–659: ~1.0–1.25% higher

💡 A 1% difference in rate on a $300,000 loan is about $175/month — or $63,000 over 30 years. Your credit score is worth working on.

💰 Your Down Payment

Putting more money down reduces the lender's risk, which typically translates to a lower rate. The biggest jump usually happens at 20% down (where PMI goes away), but there are often pricing improvements at 5%, 10%, and 15% as well.

🏦 Your Loan Type

Different loan programs carry different rates:

• Conventional loans typically have the lowest rates for borrowers with strong credit
• FHA loans often have slightly higher rates but more flexible qualification requirements
• VA loans frequently offer the lowest rates of all — one of the many benefits of military service
• Jumbo loans (above conforming loan limits) can go either way depending on market conditions

🎢 Fixed vs. Adjustable Rate

A fixed-rate mortgage locks your rate for the life of the loan. Your payment never changes. This is what most buyers choose, especially in uncertain rate environments.

An adjustable-rate mortgage (ARM) starts with a lower rate that's fixed for an initial period (typically 5, 7, or 10 years), then adjusts annually based on a market index.

ARMs can make sense if you're confident you'll sell or refinance before the adjustment period kicks in. But they carry risk — if rates rise significantly, your payment could jump substantially.

⏳ Your Loan Term

A 15-year mortgage almost always carries a lower rate than a 30-year mortgage — typically 0.5–0.75% lower. The trade-off is a significantly higher monthly payment.

For buyers who can afford the higher payment, a 15-year loan saves an enormous amount of interest over the life of the loan.

📈 Interest Rate vs. APR: What's the Difference?

You'll see both numbers when comparing loans. Here's the distinction:

Interest rate is the cost of borrowing the principal — the base rate on your loan.

APR (Annual Percentage Rate) includes the interest rate plus other loan costs: origination fees, points, mortgage insurance, and certain closing costs. It's expressed as a yearly rate.

APR is a better apples-to-apples comparison when shopping lenders, because it accounts for fees that vary between lenders. A loan with a lower interest rate but higher fees might actually cost more than a loan with a slightly higher rate and lower fees.

📈 Should You Pay Points to Lower Your Rate?

Mortgage "points" (also called discount points) are upfront fees you pay to buy down your interest rate. One point = 1% of the loan amount and typically reduces your rate by 0.25%.

Whether points make sense depends on your break-even timeline. If you pay $3,000 to save $75/month, your break-even is 40 months (about 3.3 years). If you plan to stay in the home longer than that, points make sense. If you might move sooner, they don't.

🔐 When Should You Lock Your Rate?

Once you're under contract on a home, you'll have the option to lock your rate — meaning the lender guarantees that rate for a set period (usually 30–60 days) regardless of what the market does.

Rate locks aren't free — lenders price them into the rate — but they protect you from rate increases while your loan is being processed.

My general advice: lock when you're comfortable with the rate and you have a realistic closing timeline. Don't try to time the market.

🎯 The Bottom Line

You can't control where rates are. You can control your credit score, your down payment, your loan type, and which lender you choose.

If you want to know what rate you'd qualify for right now — with no obligation — I'm happy to run the numbers with you.