We all see them every day, those ads for 4 point this or 5 point that interest rates. Unfortunately many, probably most Americans would not qualify for these. Mostly they are for people with perfect credit or just teasers to just get you in the door. Have you paid any attention to the fine print in the ad? Well for starters, it's so small that no one could possibly read them. Even it the print was large enough to read, they only show it for a few seconds so you could never read it.

The bottom line is you would need a credit score of 700 or higher and an LTV of 80% or less. You also need to go "full doc" with W2s, pay-stubs or tax returns if you're self-employed, proving sufficient income for at least 2 years.

And those super low closing costs, that's just another ploy. There are no free lunches. No matter how you cut it, you pay these costs either directly or through a higher rate.

So what really determines your interest rate? Well, it's all about perceived risk by the lender. There are several risk factors.

1) Your LTV (Loan to Value) - The higher the LTV, the higher the rate. The lower the LTV, the lower the rate, up to a point - say around 70%. Below this LTV, your rate may not change at all.

2) Your Credit Score - It's the middle score of the three bureaus. The lower the score, the higher the rate will be.

3) Your Rent or Mortgage Payment History - While a few sub-prime lenders don't check this, most do. The more "lates" (30 days late) you have, the higher the rate, and mortgage "lates" of 120 days are treated as a foreclosure even if it wasn't technically foreclosed on. Remember the golden rule.

4) The Period the rate is fixed - The longer the rate is fixed, i.e. 30 years vs. a 2 year ARM, the higher the rate.

5) Rural Property - Some lenders reduce the LTV allowed if the property is rural, however some will raise the rate and they don't want to lend on more than 5 or 10 acres.

6) Loan size - Every lender has a minimum loan size. Most are $50,000 although some will go lower. They really don't like small loans as they are just as time consuming and they make less money on them. As a result, they add on to the rate so the payment on a $75,000 loan may be less than the payment on a $74,000 loan.

That's about it for interest rate factors except to say all lenders have what may seem as quirky rules. So you may get "dinged" for some off the wall credit blip, but these are the exception and not the rule. A good broker should know these. They should also know if your loan is right for a particular lender to be sure you get the best rate with the least amount of problems. Lenders have "sweet spots" just like athletes. The more you fall outside their normal loan type, the more problems you will have. I have seen brokers try to push a loan through their favorite lender as they have the best rates and after a long delay, the rate is no better due to various "add-ons". Worse yet, the process drags on and you get turned down and loose the home to another buyer. Don't be shy. Quiz the broker about how he selects a lender so this doesn't happen to you. Best of luck.