We consider a variety of factors when we determine the interest rate and costs of your loan. The process of reviewing these factors to determine your rate is called "risk-based pricing."
The typical factors we look at include:
- Credit profile: We'll obtain a credit report that shows your current debts and payment history. The report will also include a credit score based on your overall credit history.
- Property type: Investment properties, condominiums, and multifamily homes are generally considered to be higher risks than single family detached homes.
- Loan-to-value (LTV) ratio: The amount you want to borrow compared to the appraised value of the property. Generally, the lower your LTV ratio, the lower your interest rate and costs.
- Debt-to-income (DTI) ratio: The amount of your mortgage payments and total debt payments compared to your income. A higher DTI ratio may mean higher interest rates and costs.
- Type of loan: Purchase versus refinance, an adjustable rate versus fixed rate, or cash-out refinance versus rate-and-term refinance, may affect overall risk.
Some other things that may affect your interest rate:
- Closing cost credits: You may be able to finance a portion of your closing costs as part of your loan. This may result in a higher interest rate.
- Discount points: A discount point is paid to obtain a lower interest rate that may reduce your monthly payment amount.
- Asset-Based Relationship Discount: You may qualify for a rate discount based on the balance of your eligible assets at Wells Fargo Bank, N.A. and/or Wells Fargo Advisors. Not all assets qualify. Discount not eligible with FHA and VA loans. Refer to your Customer Rate Discount Disclosure in your initial disclosure package for additional details on the Asset-Based Relationship Discount.
- Additional risk factors: We may also consider other risk factors when determining your interest rate and costs, including previous bankruptcies, foreclosures, or unpaid judgments.
