Mortgage Rates

 

What are Mortgage Rates?

  Mortgage rates are the standard rate in which a lender conveys an interest in a buyers property as security for a loan.  Mortgage rates are generally based on the prime rate.  Mortgage rates do not include additional fees (also known as points). The 30-year and 15-year mortgage rates averaged nationwide fees of 0.5 percent.

 

Type of mortgage rates

        Fixed mortgage rates- a single interest rate charged for the life of the loan.  These mortgage rates are set and will not change.

        Blended mortgage rates- the interest rate on a raised mortgage which is based on a formula that considers the interest rate on the existing loan and the interest rate on the raised mortgage amount.

        Variable mortgage rates- a lenders adjustable rate of interest.  These mortgage rates are subject to economic conditions.

What affects the mortgage rates?
 There are so many factors involved in getting individual mortgage rates because a lender needs to get a clear understanding of a borrowers personal history.  All mortgage representatives talk about low mortgage rates, but many factors play a part in getting them.  Mortgage rates can be dependent on your credit history, property, debt to income ratio, loan type, term and loan amount.

Trends in Mortgage Rates

  Fixed mortgage rates have gone up again.  The average 30-year fixed rate mortgage rose by .06%.  The five-one hybrid adjustable rate mortgages went up to 6.20%.  The economic growth has been holding solid.  Yet, short-term mortgage rates have been rising.  There's no place for mortgage rates to go but up.  The Fed Funds rate is a "floor" beneath all interest rates and the Fed has been raising that floor for close to two years. Recently that rising floor has begun to affect long-term mortgage rates in a more serious way. The Fed Funds rate was raised by one-quarter percentage point.  Subsequently, the Prime Rate rose in a similar way.  However, other rates moved less because their yields are at least partially determined by inflation and economic growth.

While what the Fed does may not have a direct impact on mortgage rates, its determination of our economy affects inflation.  In turn inflation affects our mortgage rates.  There are rising expectations for more Fed changes in May and continuing on.  The latest news points to an upswing in economic activity.  Long-term mortgage rates really dont have any room to drop.  They and short-term mortgage rates are at the floor. However, they also have little reason to soar uncontrollably higher.  Keep an eye on mortgage market trends and Wall Street securities.  This will give a consumer a better chance of obtaining a savings in mortgage rates.

What is Annual Percentage Rate (APR)?
  An Annual Percentage Rate is a tool used to compare loans with different lenders. Mortgage Rates arent always what they appear to be. You need to take into consideration the total cost of the loan including closing costs and application fees.  Often times these fees impact your mortgage rates. The Federal law requires a mortgage company to disclose the APR when they advertise a rate. The purpose is to represent the true cost of a loan, given in the form of a yearly rate. This prevents lenders from hiding fees and closing costs with a low advertised interest rate.

Can People with Bad Credit get low Mortgage Rates?
  Credit reports play a big part in getting low mortgage rates.  However, there are lenders that work with bad credit mortgage applicants.  Many times these applicants will receive higher mortgage rates. Usually, the better the credit, the better the conditions mortgage lenders will offer.  A credit score of 720 or above will likely get you the best mortgage rates.  Often the minimum score for a lender to approve a 30-year fixed-rate mortgage with a decent rate is 620. Most times homebuyers with bad credit will likely have scores lower than this. These homebuyers can repair their credit to increase their credit score and receive better mortgage rates.  For those who would rather not wait out the long process of repairing their credit, there are some options available.  For example, Fannie Mae works with homebuyers with less than perfect credit and can generally offer reasonable mortgage rates.

FHA Mortgage Rates

  What is an FHA Loan? An FHA loan is a very popular loan for a first time homebuyer.  However, it is not a program just for the first time homebuyers.  The only condition is that you can only have one FHA loan at a time.  The Federal Housing Administration was developed to improve housing standards. The FHA insures a mortgage.  By stabilizing the mortgage market through this insurance, the goal was to provide better financing conditions.  The Federal Housing Administration insures a FHA mortgage.  If a homebuyer took out a $150,000.00 30-year FHA mortgage at the current average mortgage rates they would pay $922.60 a month for the life of the loan.  The national average FHA mortgage rates range from a high of 6.750 percent to a low of 5.625 percent. This is an increase from the 5.77 percent 6 months ago.

 

VA Mortgage Rates

  What is a VA loan?  The VA Loan provides veterans with a federally guaranteed home with no down payment. This is to offer housing assistance for veterans and their families.  To be eligible for a VA loan one must serve on active duty with a minimum of at least 90 days of service during wartime or 181 consecutive days during peacetime. There is a two-year requirement for veterans enlisted and beginning service after September 7, 1980.  Other requirements exist for National guards and reservists.   The average mortgage rates for a 30 year fixed rate VA loan is 6.240% and for a 15 year fixed VA loan is 6.694%.

 

Where are Mortgage Rates Published?

  The prime rate is published on the 25th of every month in the Wall Street Journal.  Since mortgage rates are so closely linked to the prime rate this is a good indicator of what mortgage rates will be doing.  Homebuyers may also want to research competitive mortgage rates on the Internet.  Most mortgage lenders advertise their rates online.  Another useful tool is talking to neighbors and friends.  Maybe they have had luck finding lower mortgage rates than you.  Just remember to investigate any fees and or hidden costs that may apply.

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