Even with interest rates at historic lows, there are several factors that determine what your rate will be and there are some things you, the buyer, can do to lower your rate. The most obvious factor is your credit score. Generally speaking (you may find exceptions) most lenders want a credit score of at least 620. The lenders look at all 3 credit scores and the middle score must be at least 620. If you fall a little bit short, there is a credit simulator they can use to show you how you can possibly raise your score quickly---maybe by paying down a credit card that has a $1000 balance down to $200. Another factor is the length of the mortgage. A 15 year loan is going to have a lower interest rate than a 30 year loan.

You can also get a lower interest rate by paying points, or "buying down" the loan. What is a point? A point is 1% of the loan. If your loan is $150,000 a point is $1500. On a 4.5% loan, if you pay 3/4 of a point, your rate may drop to 4.25%. If you pay 2 points, or in this case $3,000, your rate may drop to 3.75%. (By the way, these examples are illustrations only, rates may vary). Is it worh it? Normally, the breakeven point if you buy down the loan is 4 to 5 years, so if plan to stay in the house for a long time, it could be a good idea but if you think you may be transferred somewhere else in a couple of years then you probably would not want to pay the points, and of course, not everyone can afford to pay points.

Here's something you definitely do not want to do......while you are waiting on your loan to close do not go buy furniture or anything else on credit. Do not change jobs. Just don't make any changes until you have closed the loan because the lender will run another credit check just before closing.

So the next time you hear that ABC Bank's interest rate is a certain percent, just realize that is a starting point and it can go up or down depending on several factors, and whatever you do, don't buy that new bedroom suite!