Your mortgage rate can substantially impact your potential monthly payments and even a variation as small as a fraction of a percentage point can make a huge difference in your costs, especially since most mortgages last for 30 years. Due to the variation and complexities of mortgage rates, consumers are often plagued with many questions and they are concerned with how the rates will impact them both now and in the future.

We compiled a list of the top mortgage rate FAQ’s to help you decipher the lot of information available and understand exactly what is happening behind the scenes of your mortgage.

1. What is the current mortgage rate?

You can find the current mortgage rate at Mortgage News Daily.

2. Why do mortgage rates fluctuate?

The mortgage rates fluctuate due to

• The adjustment by the Federal Reserve to the prime rate
• The fluctuations in the demand for home loans
• Adjustments in the foreign bond markets

Essentially, mortgage rates are driven by several economic influences and they can vary yearly; however, in the last few years they have remained within a 2% range.

3. Why do mortgage rates change with different loan types?

Interest rates will vary due to a number of factors:

• Loan Amount – The amount of the loan can change the interest rate. Lenders will typically grant the best rates to loan amounts falling in the $150,000 – $417,000 range, with variations existing even within this range. When loans fall below this range, a lender will make less money yet incur the same costs to originate the loan.

Jumbo loans (>$417,000) put more risk on the lender because if the borrower fails to pay, the bank is required to bear the full default amount. These risks will drive the interest rate higher. For this same reason, lenders will vary interest rates based on location for jumbo loans in order to minimize their risk, for different geographical locations will have different guidelines and rates.

• Borrower – The mortgage rate will also depend on the financial state +of the borrower. If you put 20% down and you have excellent credit and a stellar debt-to-income ratio, you will receive a better interest rate than a borrower who has sub-par credit or more debt to pay.

4. How Can I Lower my Mortgage Rate?

Unfortunately, there really isn’t a magic formula here. Though different banks will offer competitive rates, generally, your financial status will determine your final rate. In order to lock in the lowest rate you should:

• Maintain a high credit score – Banks like to see that you are not only free of excess debt but that you also pay your debts on time.
• Put down at least 20% – If you can supply the bank with 20% of the loan, they will feel that you are less likely to default on your mortgage and they will reward you with a lower rate. You also will not have to worry about paying PMI (private mortgage insurance).
• Submit complete documents – Banks will ask you for paperwork that displays your ability to pay off the monthly mortgage amount. If you hold back on supplying your lender with every document for which they ask, they may charge you a higher interest rate.

5. How do I Compare Rates?

Shop around for the best rates and evaluate all of your loan offers. Pay attention to all the elements of the offer in addition to the rate such as points, closing costs and fees. While one bank’s mortgage rates may be lower, it may still equate to more money out of your pocket in the long term. Speak to a professional about how to calculate points and fees and get an accurate estimation of the amount of money you will pay upfront and over the life of the loan.