They can preach communication, service and education all day, but it’s our ultimate aim to earn your trust so that you can be confident in our ability to successfully lead you through this complex mortgage process.

Since mortgage rates can modify several times a day, the following questions will help select whether or not your lender truly knows what to look for so that they can provide you with the best rate two times you’re in a position of locking in your loan:

Who determines mortgage rates, and what are they tied to?

While the 10-year Treasury Note has been known to trend in the same direction as Mortgage Bonds, it is not unusual to see them move in opposite directions.

Mortgage interest rates are determined by the pricing of Mortgage Backed Securities or Mortgage Bonds. The media often implies mortgage rates are based off the 10-year Treasury Note, which is incorrect but it is an easy answer for the general public.

Mortgage rates may modify throughout the day, however they only change on days when the Bond markets are trading securities since mortgage rates are based on Mortgage Bond prices.

How often do mortgage rates modify?

Mortgage Rates can change daily and even multiple times durring the day if the market is volitile
For example – let’s assume the FNMA 30-Year 4.50% coupon is selling for $100.50. The price is 50 basis points lower from the previous day’s closing price of $101.00.  Thus rates would rise.  If durring the day the coupon sold for $101.00 then the price to the consumer would fall.

Think of a Mortgage Bond’s sales price similar to that of a Stock that trades up and down during the coursework of a day.

What causes mortgage rates to modify?

In simple terms, the borrower would must pay an additional .50% of their loan amount to have the same rate today that they could have locked in the previous day.

Like stocks, most fluctuation is caused by consumer and investor emotions.

Mortgage Bonds are largely affected by various market forces that influence the changing demand for bonds within the market. A number of the key economic factors that have the greatest impact are unemployment percentages, inflationary fears, economic strength and the overall movement of funds in and out of the markets.

What do you use to monitor mortgage rates?

There's several great subscription based services available to monitor Mortgage Bond pricing.

The key is to make sure the lender is aware they ought to be monitoring Mortgage Bond pricing, such as the Fannie Mae 30-Year 4.50% coupon… and not the 10-Year Treasury Note or the news media.

Do different programs have different interest rates?

Mortgage Bond holders require to receive a higher rate of return on their funds if inflation is increasing, thus driving up mortgage rates. With the Federal Reserve Board meeting every four weeks, this is an important query to ask. If your lender does not have a firm understanding of this relationship, they may leave your rate unprotected costing you thousands of dollars over the life of your mortgage.

Conventional, FHA and VA loans can all over different rates on a 30-Year fixed mortgage. FHA and VA loans are insured by the Federal Government in the event of defaults. Conventional mortgages are insured by private mortgage insurance companies, if insurance is necessary.

Typically, FHA and VA loans over a lower rate because the investor views the government backing as less of a risk. While rates are usually different for each program, it may be more important to compare the every month and overall cost during the life of the loan to select which program best suits your needs.

An Adjustable Rate Mortgage (ARM) is usually fixed for a specific period of time. The period is typically 6 months, 1 year, 3 years, 5 years or 7 years. The shorter time period the rate is fixed, the lower the interest rate tends to be initially.

Why is an Adjustable Rate Mortgage (ARM) rate lower than a fixed rate mortgage?

This is due to the borrower taking the future risk of increasing interest rates. The only instance where this would not be true is when there is an inverted yield curve where short-term rates are higher than long-term rates.

Why are rates higher for different property residence types?

Mortgage interest rates are based on risk-based pricing. Risk-based pricing allows adjustments to par pricing for risk factors such as; FICO scores, Loan-to-Value percentages, property type (SFR, Condo, 2-4 Units), occupancy (Primary, Holiday or Investment) and mortgage type (Interest Only, Adjustable Rate etc).

This allows the investors who lend their funds for mortgages to get additional compensation for taking additional risk.

If the borrower encounters a financial hardship, are they more likely to make the payment on the home they live in or the four they rent out?