What Drives Your Mortgage Rate? A Guide to Making Smart Borrowing Decisions

I often tell clients that interest rates are based on layers of risk. Lenders evaluate several factors—your credit score, income, debt-to-income ratio, and down payment—when determining your rate. Interest rates aren’t fixed day to day; they fluctuate, much like the stock market. Typically, higher inflation pushes rates up, while a slowing economy can bring them down to encourage borrowing. Understanding these factors can help you better time your home purchase and make sense of market shifts.

Fixed vs. Adjustable Rates: What’s Right for You?

One important decision when choosing a mortgage is whether to go with a fixed or adjustable rate. A fixed-rate mortgage keeps your interest rate and monthly payment consistent for the life of the loan—ideal for long-term stability and budgeting. An adjustable-rate mortgage (ARM) usually starts with a lower initial rate, but it can go up or down based on market trends. ARMs may make sense if you plan to move or refinance in a few years, but they do carry more risk.
Right now, we’re seeing fewer ARMs in the market because the gap between adjustable and fixed rates isn’t as appealing as it once was.

Getting Ready for Rate Fluctuations

While you can’t control market trends, you can protect yourself by locking in your rate during the underwriting and closing process. This guarantees your rate for the life of the loan. If you choose to “float” your rate instead, you’re exposed to market changes—meaning your rate could go up or down before closing

Why the Right Guidance Makes All the Difference

Navigating rates, terms, and loan options can quickly become overwhelming. The mortgage process has a lot of moving parts, and without the right guidance, it’s easy to feel lost. That’s why I take the time to educate my borrowers on all their options, especially when it comes to pricing their interest rate. There are many choices, and they can feel confusing—but I’m here to help you make informed, confident decisions.