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Specifics of Mortgage Loan Pricing

Buying a home can be stressful—after all, it’s probably the biggest purchase you’ll ever make. A house can provide access to financing for more of life’s major expenses, so it can be well worth the investment. That means it is important to work with your mortgage lender about the specifics of loans pricing to help you better prepare for the homebuying process. 

Pricing Adjustments 

Several factors will impact your interest rate. Pricing adjustments on conventional mortgages are based on a combination of the following factors: 

  • Credit score
  • Down payment amount 
  • Property type 
  • Property usage (primary residence, vacation home, investment property) 

Private Mortgage Insurance 

Private mortgage insurance is required on conventional mortgages when the down payment is less than 20%. Private mortgage insurance covers lenders in the event a borrower is unable to repay the loan. 

Private mortgage insurance will automatically drop from your monthly payment when the Loan to value hits 78% based on the original value. Early removal can be requested if improvements are done to the home or large principal payments are made. 

You can opt to choose a higher interest rate to have PMI paid by the lender or chose to pay your entire premium up front with closing. Whether or not these are cost effective choices depend on how long you intend to stay in the home. 

The cost of your monthly premium will depend on several factors including; credit score, down payment and debt to income ratio. The higher your calculated risk factor the higher your monthly premium.


Mortgage points are an upfront fee that can be paid to lower your interest rate. Similarly, you can sometimes accept a higher interest rate for a negative point or credit which will lower your cash due at closing. Points, like pricing adjustments vary based on many factors. 1 point is equal to 1% of the loan amount. When comparing mortgage loans between lenders, it’s important to verify if points are included in your pricing. Knowing whether it’s cost effective to buy down your interest rate with points will depend on how long you plan to keep your mortgage loan.

Becoming a homeowner takes a big investment, but careful preparation can make the process smoother. And remember, help is available if you need it.