Mortgage Rates

Am I getting the best interest rate?

Keep in mind that there is not a “one size” fits all interest rate.  Interest rates are impacted by a borrower’s credit score, loan term, mortgage program and a series of  other factors.

Unfortunately, many mortgage companies will tease you with a low interest rate that only a small number of people looking for a specific mortgage.  They want to lure you in and then will switch you to a higher rate.  Not a good way to do business.

Having some idea of how interest rates work will certainly help you to feel more comfortable about the  home financing process.

While loan programs, credit scores and outside economic factors tend to control mortgage rates, borrowers do have the option of paying more up-front at the time of closing in the form of a discount point or loan origination fee in order to secure a lower interest rate.

Alternatively, borrowers currently have the option of taking a slightly higher rate in exchange for lower closing costs.  This particular rate / closing cost scenario is sometimes referred to as a “No Closing Cost Loan” option, or something similar.

Mortgage Rate Basics:

How Are Mortgage Rates Determined?

Mortgage rates are largely determined by what is known as the Secondary Market.  The secondary market is comprised of investors who buy the loans made by banks, brokers, lenders, etc. and then either hold them for their earnings, or bundle them and sell them to other investors.

Lenders set their rates every day based on the market activities of Mortgage Bonds, also know as Mortgage Backed Securities (MBS)  A solid mortgage professional will be watching the MBS market on a daily basis and know where the market has been and possibly going.  That way they can help you make a more informed decision on when to lock your interest rate.

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Questions Your Lender Should Be Able To Answer About Mortgage Rates

Simply checking online for today’s posted rate will not tell you what interest rate you will qualify for today.

Since mortgage rates can change several times a day, the most important thing to do is pre-qualify your lender about his/her competency level with regards to mortgage rates. If your lender doesn’t know what to look for or how to answer some basic questions, there is a good chance you may not ever see that initial interest rate you were quoted.

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What’s The Difference Between Note Rate and APR?

The Note Rate is the interest rate that you pay on your mortgage.  The APR takes into consideration the mortgage note rate and some of the costs of obtaining that loan.  It is supposed to be a way for you to better compare rate quotes from one lender to another.  Unfortunately, it turns out to not be a very good way to compare.

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