When you take out a mortgage to buy a home, you pay interest over the years. So what determines that rate? Obviously, your credit history probably plays the biggest role, but there are other factors that go into it, too.

Beyond your credit history, lenders also look at the following to determine your rate:

Home location: Interest rates can differ slightly depending on what state you live in.

Down payment: In general, a larger down payment means a lower mortgage interest rate, because lenders see a lower level of risk when you have more stake in the property. So if you can comfortably put 20 percent or more down, do it—you’ll usually get a lower interest rate.

Loan term: The term, or duration, of your loan is how long you have to repay the loan. In general, shorter term loans have lower interest rates and lower overall costs, but higher monthly payments. A lot depends on the specifics—exactly how much lower the amount you’ll pay in interest and how much higher the monthly payments could be depends on the length of the loans you’re looking at as well as the interest rate.

Of course, these aren’t the only factors. The type of loan and type of interest rate (variable versus fixed) also matter, but these are the factors you may not expect.

Source: LifeHacker