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Surprisingly when it comes to your mortgage rate a lot has to do with the purpose of your transaction. Are you purchasing, refinancing or simply transferring your mortgage to another lender? Are you purchasing a home to live in or purchasing a rental property? Do you have less than 20% down payment? Will your amortization be 25 or 30 years? One of the most important influencers is interest rate.  There are many factors that determine the mortgage rate you will be eligible for a key factor is the type of transaction.

Purchasing a primary residence allows for the best mortgage rate.  It is also influenced by amount you have for a down payment. If you have less than 20% down you will be offered the best rate available with a maximum 25 year amortization. A monoline lender will also offer this mortgage rate with 25 year amortization to individuals who have 35% or more down payment. This is due to the fact that these mortgages are insured or insurable and the lender has less risk. With less than 20% down the cost of the insurance is added to your mortgage. With 35% or more down the lender covers the cost of the mortgage insurance.

A mortgage with 30 year amortization is considered uninsurable. Minimum down payment for a 30 year mortgage is 20%.  Mortgage rates are typically slightly higher. Purchasing a rental investment property allows for 25 or 30 year amortization. The mortgage is also considered uninsurable due to the fact it is a rental.  A rental property is a higher risk for a lender and results in slightly higher mortgage rates.

Refinancing your home is also determined to be uninsurable and slightly higher mortgage rates are charged. Due to the fact that refinances are uninsurable up to a 30 year amortization is offered.  Keep in mind a 25 or 30 year amortization can also influence your mortgage rate. If you are transferring your mortgage to another lender there are a few factors that come into play. If your mortgage was originally insured that insurance and 25 year amortization or less will qualify you for the best mortgage rate. If your mortgage was not previously insured your mortgage rate will be determined by the current equity you have in your home.

There are other important factors determining mortgage rates.  Having an understanding of the type of your transaction will help you to better understand the mortgage rates offered to you.