What Are Mortgage Rates?

A mortgage rate is the interest rate at which a mortgage is borrowed.

Understanding a Mortgage

A mortgage is a loan, also known as a lien, against a house. A mortgage is how the majority of people buy property. Most people do not have the large amount of cash necessary to buy a home, so they take out a loan to buy a house. This loan is a mortgage. A mortgage rate is the interest rate that a mortgage loan is borrowed at.

Not all Mortgage Rates are the Same

Mortgage rates--the interest rates that mortgage loans are borrowed at--differ. Mortgage rates depend on the length of a loan, the type of a loan and the borrower's credit history.

What Types of Mortgages Exist?

There are many types of mortgages. There are 30-year fixed mortgages, 15-year fixed mortgages, bridge mortgages and adjustable rate mortgages (ARMs), to name a few. An ARM is a mortgage where the interest rate fluctuates over a certain time period. For example, a 3 percent ARM might have a borrower paying 3 percent interest-only payments on a mortgage for 3 years, but at the end of that 3-year time period, the loan will go to a current market value or higher. A fixed mortgage means that the interest is fixed for the length of the loan at the rate you entered the loan at.

How Can Someone Get the Best Mortgage Rate?

To qualify for the best mortgage rate, a person must have a good credit history, stable income, and a decent down payment for the home that he is purchasing. The better credit risk that you appear to be to the lender, the better interest rate you will receive.

Securing the Best Mortgage Rate for You

To get the best mortgage rate, shop around. When purchasing a new home, research the lending market. Get recommendations from your Realtor and from friends. Just remember, the better your credit history, the better your mortgage rate will be.