Mortgage Rates and Factors That Move Them

Mortgage rates come in different varieties as you may know. Fixed rate loans are usually most popular due to the fact that you don’t have to worry about rates going up on you over time. Currently in July, 2014 rates are still down near historic lows, although they were even lower last year. The amortizations come in 30 year, 25 year, 20 year 15 year and 10 years with most lenders. The big price break is going to be with a 15 year loan. Currently the spread between the 30 year fixed and 15 year fixed rate is 3/4%.

For those who intend to hold onto their home for the long term, and not sell in the near future, the fixed rate mortgage may be the best option. However, for those who are fairly certain that they will be selling in the not too distant future, the hybrid ARMs such as the 5/1, 7/1, and 10/1 ARM could be a better option.

The spread between the 7/1 ARM and the 30 year fixed is also about 3/4 %. (4.375% VS 3.5%) So going with a 7/1 ARM will lock in your rate for the next 7 years and you don’t need to be concerned about rates rising. Here in the summer of 2014, rates are still down, but they will not be down forever.

Mortgage rates are normally quoted in 1/8% such as 4.125%. However, when you see a rate like 4.258% this is the annual percentage rate (APR) for the quoted rate. The APR is usually higher than the note rate when the loan contains closing costs which are being financed into the loan.

So what causes rates to go up and down? Although there are many factors affecting the movement of mortgage rates, probably the best indicator is the 10 year treasury bond yield. This is due to the fact that for most people, a 30 year fixed rate mortgage is paid off within 10 years either from the sale of the home or refinanced. Treasuries are also backed by the “full faith and credit of the US” which makes them a benchmark for other bonds as well.

Normally when the T-bond yields go up, mortgage rates also go up and vice versa. They may not go up exactly the same as yields though. There are also many reports that affect mortgage rates. The Consumer Price Index, Gross Domestic Product, Home Sales, Consumer Confidence, and other data on can have a significant effect.

Normally, if there is good economic news, rates will go up and with bad news rates will move down. If the stock market is rising mortgage rates will usually be rising also since both rise on positive economic news. Also when the Federal Reserve adjusts the Fed Funds rate, mortgage rates can go up or down. If it is a growing or inflationary economic pattern then rates will rise.

During the processing of your mortgage loan, normally your broker will lock in your rate for you to protect you in case rates rise while your loan is being processed. Locks go from 15 to 45 days with most lenders. This gives the broker enough time to process your loan and get it funded.

Keep in mind that the interest rate on your loan may be adjusted for various factors. Do not be taken in by a par rate. If you are doing a loan at a high loan to value (LTV) and you have a lower credit score (<700) there will be adjustments to your rate. The par rate is the rate at which the lender who is funding your loan neither charges or credits back any rebate to the broker. By picking a rate above par, you will receive this lender credit and it can be used to assist in paying your closing costs and prepaid expenses such as property taxes, hazard insurance, or interest.

Mortgage Rates Are Falling – Again

Mortgage rates are dropping again for 30-year, fixed-rate mortgages. During the months of July through September, mortgage rates began creeping up, producing a flurry of home sales in anticipation of even higher mortgage rates to come. However, it appears those concerns of much higher mortgage rates have flown out the window as mortgage rates are back down to levels not seen since June.

What’s the Cause of the Drop?
The recent government shut down may partially be to blame for the drop in rates. The shutdown led to speculation about the Federal Reserve refusing to renew its bond purchases. Another possible cause appears to be September’s weak employment. Only 148,000 jobs were added last month, which was far lower than the expected increase of 193,00 jobs. The 30-year fixed-rate mortgage rate was listed as 4.13% last Friday (Oct. 24) which was down from 4.28% from the week before, but still higher than the 3.41% rates in October of 2012. Rates also fell for:
• 15-year fixed-rate mortgages,
• 5-year Treasury-indexed adjustable-rate mortgages, and
• 1-year Treasure-indexed adjustable-rate mortgages.

Rate Changes
The average rate change went down by only a small amount in each case. These rate changes did not reflect closing costs, though.
• 30-year, fixed-rate mortgages dropped 0.8 percent.
• 15-year, fixed-rate mortgages dropped an average of 0.6 percent.
• 5-year, adjustable-rate mortgages were down an average 3 percent.
• 1-year, adjustable-rate mortgages were down an average of 0.5 percent.

Speculation About the Government Shutdown
There has been a lot of talk about the recent government shutdown and what could have happened to mortgage rates if the shutdown were to continue over a longer period of time. In many communities across the US, applications for government-backed mortgages dropped during the 2-week long shutdown, which only fueled the speculation about what would happen if Freddy Mac and Fannie Mae were to run out of funds completely. Among the public’s concerns were worries about
1. where the mortgage money would come from;
2. mortgage lenders running amok with rates all over the place due to the lack of government backing; and
3. long delays in getting government-backed mortgages, which would only increase the longer the shutdown continued.

What’s to say that another shutdown won’t occur? What then? Many of the mortgage-lending delays occurred because lenders require verification of borrowers’ income tax and social security information to help determine their qualification for a loan. When the government shuts down, the IRS and Social Security Administration close their doors and send employees home, so the information they provide becomes unavailable. The longer the shutdown lasts, the longer it takes lenders to get the information, which in turn, lengthens the time it takes buyers to get into their new homes.

Is it time to overhaul the mortgage rules and the government’s role in the mortgage industry? Who’s to say, though there seems to have been some discussion along this line lately. This may be another wait-and-see scenario. In the meantime, it’s benefiting the real estate industry by allowing interest rates to drop again and keep the potential for buying a home within the realm of possibility.

The Right Way to Beat Rising Mortgage Rates

The variable rate mortgage is really a bank loan that features a fixed introductory interest rate to get a to some degree short period of time – typically from 2 to Ten years based upon the item – and after that time, the mortgage changes up and also down depending on the loan’s margin, caps, plus the index that the loan is tied to. Almost always, the actual fixed interest rate to the specified stretch of time is leaner than conventional 17 to 46 year fixed rate mortgage products and solutions.

What countless applicants may well are not able to seem to comprehend is that these loan officials as well as mortgage brokers put on commitment into determining whether a borrower is even qualified to have a home mortgage loan. When it reaches as a result of the wire, they can rather are satisfied with a smaller amount of a commission than no commission at all. And here, you have the room to barter and escape a bundle of money immediately, plus on the lifetime of the mortgage loan.

You can find risks and rewards when it comes to considering a 5 year variable rate mortgage. The advantage is that you could reduce costs by locking inside a lower interest rate with the first five years. Rates are typically lower the shorter the promotional period on this form of mortgage, so a shorter variable rate would have less interest rate when compared to a long run mortgage. Plus, it usually is possible to make additional principal reduction payments monthly or quarterly to try to shorten lifespan in the loan. Saving money using a variable rate mortgage having a lower interest rate for the fixed introductory interval may assist you to make those additional payments.

Any new home buyer will show you that unusual closing costs and interest rates can be tricky, at best. Mostly, they could be downright intimidating because if they are too high it may mean paying much more for your home mortgage. You’ll be able to negotiate interest rates and closing costs, community. could be a tricky prospect. Loan officers and mortgage brokers often get a portion from the total mortgage loan amount as commission, so they really would like to understand the borrower obtain the highest number of fees and interest possible. It is their bread and butter, as it were.

When it comes to what’s so great about these lower mortgage rates, it is critical to take into account the amount of time you could possibly are now living in your property, your current and projected future income, your ability to spend a larger monthly mortgage payment if the 5 year ARM adjusts to your higher rate before you close against each other, and the savings it is possible to achieve while paying lower interest rates in the fixed period.

Fortunately that borrowers will have the possibility to call their particular interest rate and closing costs with Offer to Lenders. Decide what you look for the purchase price to be and let lenders compete to win the house mortgage loan. “Name your rate and your closing cost” and win each and every time should you your sufficient research! Lenders are definitely more willing to be a little more flexible since they’re not charged for ones offer, so they can afford to present the most beneficial mortgage deal possible without any obligation to consumers

till closing day.

It is strongly recommended that you just meet with a mortgage and tax professional when weighing the potential for loss, rewards, and attributes of a variable rate mortgage. While most of these mortgages will help cut costs for a while, it’s important to use a long-term plan when scouting for a variable rate mortgage. A licensed mortgage loan officer may help you comprehend the implications of selecting the best mortgage accessible in industry.

One instance certainly where an 5 year variable rate mortgage will make sense is that if you recognize you likely will never be in your own home for longer than 5 years. Then chances are you’ll wager that you close out of the loan before it could alter to a potentially higher rate.

Once you understand the desired financial disclosures to your mortgage loan, you need to check out these with careful scrutiny. This is when there is a fees and rates that can be negotiated. Things like document processing fees and underwriting costs are incredibly negotiable. By looking around and gathering competitors’ rates and charges, you are able to essentially ‘force’ your mortgage lender to offer you the fees and rates that you’d like, within reason. Home appraisal and inspection fees can oftentimes be negotiated directly while using appraiser and the inspector, so you can may well avoid some dough doing this, too.

Variable rate mortgages have obtained some negative awareness nowadays as numerous men and women found themselves not working or maybe without enough equity left inside their residences so that you can refinance. Nonetheless, inside the right situations, a variable rate mortgage affords returns regarding prospective lower temporary interest rates.

At the end for the day, each individual has to examine precisely what is their utmost financial determination. Were still in uncertain occasions in the state with the economic system and also the quantity of residences which have been traditional bank managed. A lot of banks are not releasing homes yet. Whenever they do will house values keep falling? After that get lucky and interest rates then? Will interest rates keep rise, or will interest rates reduce allowing more people the opportunity to spend money on most of these foreclosed households? These are typically uncertain times regarding mortgage interest rates plus the sale involved with properties.