What determines the interest rate a borrower will receive on a mortgage?

The interest rate a borrower receives on a mortgage is primarily influenced by several key factors, which include the borrower's credit score, the type of loan they are seeking, and prevailing market conditions.

A borrower's credit score is crucial because it reflects their creditworthiness; a higher score typically indicates a lower risk for lenders, which can lead to more favorable interest rates. Loan type also plays a significant role, as various loans have different risk profiles and pricing structures. Additionally, market conditions impact overall interest rates due to economic factors such as inflation, employment rates, and the Federal Reserve’s monetary policy, which can influence bond yields and, consequently, mortgage rates.

The other options do not comprehensively encompass the elements that affect mortgage interest rates. While property value and closing costs are relevant in the context of the total cost of the loan, they do not directly determine the interest rate itself. The lender's advertising campaigns may help attract borrowers but have no bearing on the actual rate offered. Lastly, the down payment amount can affect loan terms and overall borrowing costs, but it is just one factor within a larger framework and does not solely determine the interest rate.