Home Matters: What's in a Rate?

Our Lock Desk Specialist explains what factors play a role in the rate you pay on a home loan

By: First International Bank & Trust

When it comes to shopping for a home loan, a lot of potential buyers will get caught up on the interest rate. But how many of them know how those rates are set? We talked with our lock desk specialist about just how those rates are set for each buyer.

"If the property is purchased or refinanced if it is going to be an investment property, how much you're going to be putting down. What's your credit score," First International Bank & Trust Lock Desk Specialist, Forrest Anderson, goes through the laundry list of factors that are considered when determining a borrower's interest rate. Beyond the factors of the purchase, is the factor of the market—which can cause major volatility.

"It depends what reports are coming out, what the mortgage-backed security market is doing, what the Dow market is doing, so we look at all these different aspects, and it just really depends on the day. If somebody tweets something, it really can kind of throw off the market sometimes," Anderson explains.

Another rate to consider when you're comparing lenders is the APR.

The APR stands for annual percentage rate, which factors in fees associated with the origination process of that loan, so as a customer, you can kind of shop other lenders and see who is giving you the best deal.

Since Transaction costs and fees are taken into account when calculating the annual percentage rate, it can give you a better idea of what that loan will cost you. But as with many things in life, you get what you pay for. So consider the level of service a lender can provide, including how soon they can close your loan, how comfortable you are with them, and what kind of relationship you can expect after closing.