Understanding Mortgage Risk Factors, Points & Interest Rates

When you’re in the market to buy a new home or investment property, it’s one thing to get a pre-qualification over the phone and a completely different thing when you later sit down and actually apply for a loan. So before you get too far into the process, you should know which factors could end up inflating the interest rate on your mortgage.

Over at Reuters, they’ve linked to a matrix Fannie Mae [PDF] uses to adjust interest rates on new loans.

Among the biggest risk factors that virtually guarantee an upward adjustment on your interest rate:

* FICO scores below 740: Even a not-horrible score of 700 could add .75% to your rate. The low end of the range (620-639) could add a full 3%.

* 40-year loans: Will add .125% to your interest rate.

* Investment properties: Be prepared to add at least 1.75%.

* Condominiums: Add up to .75%.

* Manufactured homes: That’ll be another .5%.

* Multiple-unit properties: Will have you paying an extra 1%.