What can affect the interest rate on a mortgage?

The borrower's credit score is a critical factor that directly affects the interest rate on a mortgage. Lenders assess credit scores to gauge the risk associated with lending money to a borrower. A higher credit score typically indicates that the borrower has a strong history of managing debts responsibly, making them less of a risk and thus eligible for lower interest rates. Conversely, a lower credit score suggests a higher risk of default, often resulting in higher interest rates as lenders seek to offset the risk they are taking on.

While the size of the home, the age of the borrower, and the type of neighborhood may play a role in the overall lending process or the amount lent, they do not directly influence the interest rate as significantly as a borrower’s creditworthiness, which is measured by their credit score. Therefore, understanding and maintaining a good credit score is crucial for borrowers seeking favorable mortgage terms.