Here at TVFCU, we offer unique opportunities for people who are looking to buy a home or refinance their home loan. As a credit union member, you are provided with benefits that you won’t get at a for-profit financial institution or bank. This is because any credit union is technically a not-for-profit and is a member-owned cooperative. This means that instead of answering to shareholders demanding profits, any surplus earnings are passed back to the members in the form of lower rates, better terms, and reduced fees.
Today on the blog, we hope to educate house shoppers on mortgage rates, more specifically, how they are determined and calculated.
When it comes to what determines mortgage rates, it really comes down to two main factors: The Baseline determined by the economy, and your personal borrower-specific factors. Let’s break those down more specifically.
The Baseline Determined by the Economy
No matter where you go to get your home loan, mortgage rates will fluctuate for everyone based on global market conditions and U.S. monetary policy.
10-Year Treasury Yield
30-year mortgage rates are closely tied to the 10-Year Treasury yield. When Treasury yields rise, mortgage rates will typically follow behind. The 10-Year Treasury yield is the annual interest rate the U.S. government pays to borrow money for 10 years. As of June 2026, it’s around 4.45%-4.5%.
Inflation & Economic Growth
Another factor that will impact the baseline is inflation. When economic growth is strong and inflation is rising, interest rates will usually push higher because investors demand higher returns to combat the loss of purchasing power. This is because high inflation erodes the future value of money, which forces investors and lenders to need higher returns to protect their returns. The Fed will typically raise the federal funds rate when inflation rises to try to slow consumer spending and cool off the economy.
Your Personal Factors that Determine Mortgage Rates
Now that we covered the macroeconomic side of things, let’s talk about the individual lender’s situation and how that impacts rates. Lenders need to assess the risk level of a borrower, and that helps determine the rate.
Credit Score
The first thing to consider is your credit score. Higher scores signal lower risk, which helps to qualify for the best or lowest rates. Those with lower credit scores are charged higher rates.
Loan-to-Value Ratio
Next, the lender will look at your Loan-to-Value Ratio. In layman’s terms, this is just the size of your loan, compared to the home’s value. The higher the down payment, the lower the risk for the lender. The larger your down payment, the lower your LTV ratio.
Debt-to-Income Ratio
Next, the lender will look at your Debt-to-Income ratio. This is why your gross monthly income matters when applying for a mortgage. DTI measures your gross monthly income vs your monthly debt payments, INCLUDING your new mortgage. A lower DTI signals less risk, demonstrates you aren’t overextended, and helps your rate.
Use & Term Length
Lastly, your personal mortgage rate will depend on what you’re using the property for and how long you plan to be financing it for. A shorter mortgage at 15 years will typically offer a lower rate than a 30-year loan. If a person is purchasing the home for their own primary residence, this typically will present a lower mortgage rate than if they were purchasing the property for a rental or investment property.
It’s important to note that these are a few high-level factors, but rates will always vary by lender and by lendee. If you or someone you know is interested in learning more about getting a mortgage with TVFCU, you can stop by our branch at 10 Jefferson St. in Batavia, or you can reach out on our mortgage page to get started!
