support-iconCall Us
chat-with-us-iconChat with Us
user-account-icon
Call Us
Call Us833-818-2253
icon
Chat With Us
GET STARTED

How Do I Know Which Interest Rate to Pick?

5 min read
Rows of colorful houses on a hillside

We hear a lot about interest rates on the news, but are they really different from one lender to the next? How do you pick the lender with the best mortgage rates? We think the process is more complicated than it needs to be. At Cake, we simply help you find the best mortgage rates for your new home or refinance. Our mission is to partner for life, helping you navigate your future financial decisions, including understanding rate changes. Although your financial history and decisions have some impact on your mortgage rate, other factors are beyond your control.

The Federal Reserve

Contrary to what many people believe, the federal government does not directly determine mortgage rates. Fixed-rate mortgages are tied to treasury bonds, which can change based on the federal funds rate. Without getting too bogged down in economics, the short takeaway is that government actions can affect mortgage rates, and this is out of your control.

    Your Credit History

    The good news is that your credit history—which mostly is in your control—can lower your mortgage rate. The best lenders will offer lower interest rates to customers with higher credit scores. You can visit our FAQs to learn more about how taking out new lines of credit during the underwriting process may affect your mortgage.

      Loan Term

      15-year mortgages usually have lower interest rates than 30-year mortgages. Of course, the monthly payment is higher for a 15-year mortgage. At Cake, we help you find the best mortgage rates for either term, depending on what you can afford.

        Fixed vs. Adjustable

        The interest rate type can also have an impact on the exact number of the rate. Fixed-rate mortgages keep the same rate for the entire term of your loan. An adjustable rate may start low, but it can change over time, potentially going much higher during the life of your loan. Speak with a mortgage specialist at Cake if you have questions about these types of rates.

          Other Factors

          Some other decisions you’ll make will also have slight impacts on the final mortgage rate. These decisions include:

          * The location of your home. The interest rate may vary by state.
          *  The amount of your mortgage—the total number you’re borrowing.
          *  The size of down payment you’re able to make at closing. Usually, a larger down payment means a smaller interest rate.
          *  Points—you have the option to buy “points” at closing which will lower your rate. More money upfront will build trust with the lender and allow them to offer you a lower interest rate.
          *  The type of loan. Whether you’re doing a conventional loan, or VA loan will also impact your final interest rate.
          *  The lender. While many lenders claim to offer the best mortgage rates, you may receive quotes of two different numbers from two different lenders.

            Cake's Mission

            Finding the best mortgage rates is step one for us at Cake. Not only do we offer strong rates, but we use an efficient, technology-driving process to have some of the fastest closing times in the industry. Send us your questions. Our professionals help you decide which loan is the right one for your home purchase. Your home buying pre-approval process is just a click away with Cake.