A mortgage interest rate, or mortgage rate, is essentially the cost of borrowing money from a lender to buy a home. It’s a percentage of the total loan amount (i.e. the rate of interest) paid over the loan term. There are two main types — fixed rates and adjustable rates.

There are two common types of interest rates we offer at Zillow Home Loans: fixed and adjustable.

• Fixed mortgage rate: Your interest rate, and your monthly principal and interest payment, stays the same for the entire loan term.
  
  
• Adjustable mortgage rate (ARM) or variable rate: This starts with a fixed rate for an initial period. After that, the rate can change at set intervals based on the market, which means your monthly payment could go up or down based on your loan term. This adjustment period varies by lender.
  
  

When you work with us, we’ll help you understand which rate type fits your budget and long-term goals.

At Zillow Home Loans, we set mortgage rates based on a mix of factors. Things like your credit history, how much you're putting down, and the value of the home all help shape your individual mortgage rate. Rates are influenced by broader market trends like inflation and job growth, and can fluctuate daily or even hourly. Since there’s no one-size-fits-all formula, mortgage rates can vary from lender to lender.

Our loan officers are happy to help talk you through these factors and explore the best options for your situation.

Your mortgage interest rate is the basic cost of borrowing money. It’s the percentage of your loan amount that you pay the lender each month.

The APR, or annual percentage rate, gives you a more complete picture. It includes the interest rate plus any extra finance charges tied to getting the loan, like lender fees and discount points. That’s why the APR is usually a bit higher — it reflects the total cost of the loan over time.

A mortgage point is an upfront fee you might pay your lender for a particular interest rate on your loan, usually equal to 1% of your total loan amount.

You’ll see any points listed in your Loan Estimate, which you'll get after applying for a mortgage. That’s the best place to understand exactly what you're paying and why.

Origination fees are what a lender charges to set up your mortgage. They cover things like processing your application, underwriting, and getting your loan funded. These fees usually stay the same, unless you make a big change, like switching to a different loan type.

This fee covers the cost of processing your application, underwriting, and getting your loan funded. This fee usually stays the same, unless you make a big change, like switching to a different loan type.

For example, if you go from a conventional loan to a VA loan, that could affect your fee. You’ll see any origination fees clearly listed on your Loan Estimate.

Discount points are an optional way to lower your interest rate by paying more upfront at closing. It’s a tradeoff — pay a bit more now to save over time with a lower monthly payment. If you choose to buy discount points, they’ll be listed on your Loan Estimate, so you’ll know exactly what you’re paying and how much you’re saving.

One mortgage point equals 1% of your total loan amount. For example, if your loan is $100,000, one point would cost $1,000. Two points would be $2,000, and so on.

That depends. The amount your rate drops for each point paid can vary based on your loan type, the lender, and the current market. Some lenders offer a bigger rate reduction per point, while others may offer less.

Our loan officers at Zillow Home Loans can help talk through scenarios regarding points and your loan amount.

A mortgage rate lock (or “lock-in”)is an agreement between you and your lender that means that after you’ve entered into this agreement, your rate won’t change while you’re going through the loan process — as long as your application details don’t change and you close within the lock period (usually between 30-45 days for a conventional purchase transaction). Changes in your application that could affect your rate include your loan amount, credit score, and verified income.

A rate lock gives you peace of mind during a time when rates can shift daily. Talk to your loan officer at Zillow Home Loans about locking in your rate.

If you’ve found a rate you’re happy with and think it might go up, it may be a good idea to lock it in. Rates can change quickly, sometimes even hourly, so locking when they’re low can help you avoid surprises later. A locked rate also means a locked monthly payment, giving you more confidence in what you can afford.

While the Federal Reserve doesn’t set mortgage rates directly, its actions do have an impact — especially on loans with variable rates like adjustable-rate mortgages (ARM).

When the Federal Reserve raises rates, borrowing gets more expensive for banks, and that can lead to higher rates for borrowers too. Fixed-rate loans aren’t immediately affected, but if a federal increase is expected (or just happened), it’s a good idea to move quickly if you’re thinking about locking in a rate.