Which factor is crucial when determining interest rates for a mortgage?

The borrower's credit history is a crucial factor in determining interest rates for a mortgage because it provides lenders with insight into the borrower's likelihood of repaying the loan. A strong credit history, characterized by timely payments and low levels of debt, suggests that the borrower is less risky; thus, lenders are often willing to offer lower interest rates to incentivize borrowing. Conversely, a poor credit history may indicate higher risk, leading lenders to increase interest rates to compensate for the potential of default.

Other factors, while important, do not weigh as heavily in the determination of interest rates. For example, the geographic location of the property can influence market dynamics and property values, but it does not directly reflect the borrower's financial behavior. The down payment amount does affect the overall loan terms and can impact the lender's risk, but it doesn't capture the borrower’s repayment capability as comprehensively as credit history does. The type of mortgage insurance, while relevant in certain types of loans, is generally not a primary determinant of interest rates. Thus, the borrower's credit history stands out as the most significant factor in assessing interest rates on mortgages.