Your mortgage rate is the product of numerous factors, ranging from the direction of the Federal Reserve and the financial markets down to you, your credit score and the type of home you’re buying.

Let’s start with the big picture stuff first.

Supply and Demand

When the demand for home loans increases, lenders can raise mortgage rates. If there are more buyers than sellers, in any field, not just real estate, the sellers can set higher prices. However, when the demand for mortgages drops and sellers must compete for the business of a dwindling number of buyers, mortgage rates will tend to drop. Lenders will need to compete so they’ll bring their rates down.

When an economy is growing and there is strong demand from consumers, it’s called inflation. It means the value of goods and services rises, and as such, so do the prices we pay. That includes real estate and mortgage rates.

Remember also that a mortgage is a product or investment that is bought and sold by investors. If you’ve owned homes before you may have experienced a time when the institution holding your mortgage sold it to another institution. Investors see mortgages as relatively safe and reliable investments. But if the market has many other more appealing investments, lenders may raise mortgage rates to make their mortgages more attractive to investors.

Interest Rates

Mortgage rate changes are also associated with changes in interest rates, but they don’t always go in the same direction. A lender may need to lower its mortgage rates in order to attract more business, perhaps to meet a commitment to close on a target number of mortgages by a certain deadline. That lender may have to lower the rates it offers even though interest rates have gone up in order to be more competitive.

Lending institutions also take their cues from the short-term interest rates set by the Federal Reserve. A 12-member panel votes to set rates or set targets for rates depending on a range of economic conditions, lowering rates to encourage more borrowing and raising them to generate greater return on investments. In recent years, as the real estate market has struggled, interest rates have remained relatively low.

Ten-year U.S. Treasury bonds are also indicators of current mortgage rates. Because the average mortgage is re-financed every 10 years or so, mortgages and 10-year Treasury bonds are considered similar financial instruments. So if you want to get an idea of how mortgage rates are moving, pay attention to the rates on 10-year Treasury bonds.

The length of the mortgage also has a lot to do with the rate you can qualify for. A 15-year mortgage, for example, will carry a much higher rate than a 30-year mortgage.

Borrower’s Profile

While market conditions dictate to a great degree what mortgage rates are available to you, your own financial picture helps dictate the kind of rate you can get. The personal factors that affect your mortgage rate include your assets, liabilities and net worth (essentially, your assets minus all your liabilities), your gross income and your credit history. A high credit score can help secure you a better mortgage rate.

Because your credit score is the one mortgage rate factor that you can control, the more you make sure to pay your bills on time and limit the amount of debt you carry, the better score you can achieve and the better mortgage rate you can land.

Also, if you have been a customer at a particular bank for a long time, you may be able to get a slightly better rate from that institution, though it’s always worthwhile to compare rates.