What Affects Your Mortgage’s APR?

A mortgage is a loan taken out to finance the construction or purchase of your home. APR stands for “annual percentage rate”. The APR on your mortgage is the interest rate on your loan plus all of the costs such as points and origination fees. The factors that affect your APR are:

  • Credit score: The single biggest factor that people can control that affects a mortgage rate is their credit score. The higher your credit score, the lower your interest rate will be because the bank views you as a lower credit risk.
  • Debt-to-Income Ratios: Even with a high credit score, banks will still look at how much the mortgage and other debt obligations will take out of the borrower’s monthly pretax income. The larger the ratio, the higher your interest rate will be because of the increased risk of default.
  • Time Frame: The longer the term of your loan, the higher your interest rate will be. For example, a 30-year mortgage will have a higher interest rate than a 15-year mortgage because of the increased risk of inflation the bank takes on.
  • Points: Points are a fee that you can pay at the start of the loan to lower the interest rate. Each point paid will reduce the interest rate by about 0.25 percent and will cost 1 percent of the loan.
  • Closing Costs: Closing costs vary from bank to bank. The higher the closing costs, the higher the APR will be on the mortgage.

For complete mortgage loan program details and to find out if you qualify, contact us today at 888-488-3807 or go to www.OneTrustHomeLoans.com.


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