## What Are Mortgage Rates Based On?
Mortgage rates are based on a number of factors, including:
* **The Federal Reserve’s target interest rate:** The Federal Reserve is the central bank of the United States. It sets the target interest rate, which is the rate at which banks lend to each other. Mortgage rates are typically based on the 10-year Treasury yield, which is influenced by the Federal Reserve’s target interest rate.
* **The economy:** The state of the economy can also affect mortgage rates. When the economy is strong, mortgage rates tend to be higher because there is more demand for money. When the economy is weak, mortgage rates tend to be lower because there is less demand for money.
* **Inflation:** Inflation is the rate at which prices rise. When inflation is high, mortgage rates tend to be higher because lenders are concerned that the value of their loans will erode over time. When inflation is low, mortgage rates tend to be lower because lenders are less concerned about the value of their loans eroding over time.
* **The supply and demand for mortgages:** The supply and demand for mortgages can also affect mortgage rates. When there is a lot of demand for mortgages, rates tend to be higher because lenders can charge more for their loans. When there is less demand for mortgages, rates tend to be lower because lenders have to compete for borrowers.
## How to Get the Best Mortgage Rate
There are a number of things you can do to get the best mortgage rate:
* **Shop around:** Get quotes from multiple lenders before you decide on a loan. This will help you find the lender that offers the best rate and terms for you.
* **Compare loan terms:** Be sure to compare the loan terms, such as the interest rate, loan term, and closing costs, before you decide on a loan. The loan with the lowest interest rate may not be the best loan for you if it has high closing costs or a long loan term.
* **Get pre-approved:** Getting pre-approved for a mortgage will show sellers that you are a serious buyer and can help you get a better interest rate.
* **Improve your credit score:** Your credit score is a major factor in determining your mortgage rate. The higher your credit score, the lower your interest rate will be. You can improve your credit score by paying your bills on time, keeping your credit balances low, and avoiding new credit applications.
## Conclusion
Mortgage rates are based on a number of factors, including the Federal Reserve’s target interest rate, the economy, inflation, and the supply and demand for mortgages. By understanding the factors that affect mortgage rates, you can position yourself to get the best rate possible.