Qualifying for a mortgage loan can be an emotional roller coaster. Gathering documents, double checking financial statements, and reviewing your credit are all part of what it'll take for you to get the mortgage loan you desire, but you may also be wondering as you go through the process, ?What affects my mortgage rates?? If by chance you haven't asked yourself this question, then you should, because the answer affects you, whether you are aware of them or not.
Mortgage rates are based on a host of criteria and stipulations, many of these you have no control over but as far as others are concerned, only you hold the key. If you want to get the best interest rates and terms available on a mortgage rate then you should know what affects the rates you are offered.
Your credit- Your credit rating is one of the main ways in which lenders gauge your ability to repay a mortgage loan. If you've exemplified a history of paying your bills on time and in full then you should have no problem in this area. But if your credit has some past delinquencies or reveals purchases that were not completely paid for then you can expect to pay higher interest rates and experience difficulty in finding loans at all.
Your debt to income ratio-Even if you have really good credit but have a high amount of debt, this can hurt you. Mortgage lenders want to know that you will repay your home loan no matter what happens and if you have a high amount of debt, lenders tend to feel as though you may have trouble repaying them if/when you experience financial hardships.
The value of the home- The more expensive the home is, the more you'll likely need to borrow, and the more money you choose to borrow, the more risky you are perceived to be. If you seek to borrow the full value amount of a home then you can expect to face more stringent standards than someone who is only seeking a partial loan.
The length of the loan- If you seek a mortgage loan that is shorter then you can expect to make higher payments for a shorter period, whereas if you take out a longer loan then your payments will be lower but you'll pay more interest over time.
Knowing what affects your mortgage rate will assist you in getting the mortgage rates that are right for you.
You hear quite a bit lately that ?the Fed is cutting the interest rate.? Maybe you've been considering a refinance, and you're waiting to move forward till the Fed takes action again. But be smart about waiting and watching. A Fed cut doesn't directly affect long term rates (for instance a 30 year fixed mortgage), but it does impact long term mortgage rates. The problem is the impact might not have the result you've been waiting for.
Who is the Fed? Well, it's really the Federal Reserve. And when the Fed cuts rates, it usually cuts the Fed Funds Rate, which is the rate banks lend each other money. However, when the Fed lowers the Fed Funds Rate, Prime Rate, the rate banks give their best customers, usually drops as well. Ok, that's great. But what does that really mean to the average person on the street? It means that anything that has an interest rate tied to Prime is directly affected by the Feds? rate cut. Typically, these are short term loans. For instance: a credit card or a Home Equity Line of Credit (HELOC). In general, these rates decline when the Fed lowers rates. On the flip side, a Fed rate cut means your savings will perhaps not yield as much interest and your CD (certificate of deposit) won't be at such a great rate. So, it's not all good.
Why aren't mortgages directly affected? Because mortgage rates are typically longer term rates and are influenced by buyers and sellers in the bond market. Daily movements in the bond market cause mortgage rates to change. That's why you might get a quote from a loan officer on Tuesday, and on Wednesday, your quoted interest rate has increased .125%. The Fed lowers rates to help stimulate the economy. Ultimately a healthy economy is good for the real estate market. Jesse Lehn, Senior Vice President for Mortgage Investors Group, believes, ??a liquid real estate market is beneficial for the mortgage market and that keeps rates competitive.? So, when the Fed lowers rates, indirectly it can help mortgage rates, but there is no direct correlation.
Another misconception is that mortgage rate changes occur in direct relation to when a Fed rate cut happens. In actuality, most mortgage rate changes, positive or negative, occur regardless of whether the Fed is actually meeting. That's because the mortgage market anticipates what the Fed is going to do.
A good loan officer should have their finger on the pulse of the market, but again it's a gamble. Remember to have a target interest rate in mind if you want to lock a loan but are watching the market. Trying to lock an interest rate on the day the mortgage rates have reached their lowest point in a year is like trying to get a royal flush in poker. It happens, but it's not a realistic goal. It just means you were lucky. Just stick to your home financing goals and consider the big picture, and you'll be fine.
Both Marcus Brady & Kristin Abouelata - Home Loans are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Marcus Brady has sinced written about articles on various topics from Debts Loans, Debt Consolidation and Mortgage. Just searching for the best is not enough nowadays, you need to seek professional advice. Choice Home Loans can help you just li. Marcus Brady's top article generates over 6600 views. to your Favourites.
Kristin Abouelata - Home Loans has sinced written about articles on various topics from Real Estate, Home Buyers Guide and Build Muscle. Let My Experience Work For You! Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kr. Kristin Abouelata - Home Loans's top article generates over 5400 views. to your Favourites.