The thing with mortgage rates is that they vary greatly depending on a number of market forces and borrower-specific factors.

That’s why it’s impossible to just throw a rate out there like 2.99% or 3.99%.

Sure, a handful of borrowers may qualify for a mortgage rate like that, but there will be many others who qualify at a higher (or even lower) rate, assuming they even get approved.

This has to do with mortgage pricing adjustments, which I’ve written about in great detail.

They include:

- Loan purpose (home purchase or refinance)
- Loan amount (conforming or jumbo)
- Credit score
- Loan-to-value ratio
- Documentation type
- Property type
- Occupancy type
- Debt-to-income ratio

All these factors, and perhaps others imposed by various banks and mortgage lenders, can move your mortgage rate significantly.

For example, if you want to refinance a second home with a 660 credit score and a loan-to-value ratio of 80 percent, your mortgage rate will be much higher than a borrower with an 800 credit score purchasing an owner-occupied single family residence from 50 percent down.

Risk Determines Mortgage Rates

This all has to do with risk; clearly our second borrower in the example above is less of a risk, considering they’re putting more money down, have a much better credit score, and plan to live in the place full time.

When it comes down to it, most mortgage rates you see on TV, the Internet, or anywhere else are just marketing rates, meaning they’re simply being utilized to get you in the door.

(Check all 3 credit scores for FREE before you apply for a mortgage)

Once you present your unique loan scenario to the mortgage broker or loan officer, your rate may be nowhere close to that ad you saw.

So don’t be surprised, just know that the less risk you present, the lower your mortgage rate should be (risk-based pricing).

If you use a little common sense, you’ll quickly be able to determine why your rate should be higher or lower, or just in line with the advertised rate.