Question 1

What is a mortgage rate?

Accepted Answer

A mortgage rate is the interest charged on your home loan. It affects your monthly principal and interest payment and the total interest paid over the life of the loan.

Question 2

How do I compare mortgage rates?

Accepted Answer

Compare loans with the same term, loan type, lock period, and point structure. Review both the interest rate and APR, along with lender fees and estimated cash to close.

Question 3

What is the difference between interest rate and APR?

Accepted Answer

The interest rate is the cost of borrowing the principal. APR is a broader annualized cost that also includes certain lender fees, points, and other finance charges.

Question 4

What is a mortgage point?

Accepted Answer

One mortgage point equals 1% of the loan amount. Points may be charged as origination fees or paid as discount points to reduce the interest rate.

Question 5

What are origination fees?

Accepted Answer

Origination fees cover the lender's work to process, underwrite, and prepare the mortgage. They may appear as a flat fee or as a percentage of the loan amount.

Question 6

What is a discount point?

Accepted Answer

A discount point is an optional upfront payment used to obtain a lower interest rate. Whether it is worthwhile depends on the cost and how long you expect to keep the loan.

Question 7

How much does a mortgage point cost?

Accepted Answer

One point costs 1% of the loan amount. For example, one point on a $400,000 mortgage costs $4,000.

Question 8

How much will one point lower my rate?

Accepted Answer

There is no fixed reduction. The rate improvement varies by lender, loan program, market conditions, credit profile, and lock period. Your Loan Estimate shows the actual pricing.

Question 9

What is a lender credit?

Accepted Answer

A lender credit helps cover some closing costs in exchange for accepting a higher interest rate. It can reduce upfront cash but may increase the loan's long-term interest cost.

Question 10

What is a mortgage rate lock?

Accepted Answer

A rate lock reserves an interest rate and specified pricing for a limited period while the loan is processed, provided the loan details do not materially change.

Question 11

When should I lock my mortgage rate?

Accepted Answer

The timing depends on your closing schedule, risk tolerance, and current market. Confirm that the lock period is long enough to cover underwriting and the expected closing date.

Question 12

How does the Federal Reserve affect mortgage rates?

Accepted Answer

The Federal Reserve does not directly set mortgage rates. Its policies influence inflation expectations and bond markets, which can cause mortgage rates to rise or fall.

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