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.

Factors That Affect Your Mortgage Rate

There are going to be many factors which affect your mortgage rate, some of which are under your control and others which you can do nothing about. You should be aware of all of the factors which might affect your mortgage rate and take them into consideration before applying for a mortgage loan. You can take steps to improve some of the factors which affect your mortgage rate and make decisions about when is best to apply based on basic knowledge about your mortgage.

What is a mortgage?

Most people understand the basic definition that the mortgage is a loan which is used to purchase a home. There is slightly more to the mortgage than this. The mortgage is a loan which uses the property itself as collateral. If you fail to make the payments on your mortgage, the property may be taken over by the lending institution who has given you the mortgage.

You want the best mortgage rates

The mortgage is a long-life loan meaning that it is not going to be fully repaid for many, many years. A standard home mortgage is often a fifteen or twenty year loan. This means that you want the best mortgage rate possible because you are going to be needing to pay this rate for a long, long time.

Factors affecting mortgage rates

Major factors affecting mortgage rates include:

o Amount of down payment on mortgage
o Consideration of closing costs
o Income of mortgage borrower
o Life of mortgage loan
o Life of mortgage rate
o Total mortgage loan amount
o Whether or not the mortgage rate is adjustable

Factors making up a desirable mortgage rate

The basic premise of the desirable mortgage rate is that it is within your budget, has a low interest rate and is paid back as quickly as possible. How all of this plays out in terms of each individual mortgage depends upon the independent factors of each borrower. For example, you might prefer a fifteen-year mortgage loan to one that is paid over thirty years. This will allow you to save money over time because you pay less in interest. However, if you can not afford the higher monthly payments and you default on the mortgage loan, you have not helped yourself out any.

Negotiating a desirable mortgage rate

The simplest method of achieving a desirable mortgage rate is to work with a mortgage broker. You will have to pay up front fees to the mortgage broker, usually at the time when all of the closing costs are paid on the home purchase, but you will save money and time in the long run. The mortgage broker plays the role of assessing your personal financial situation and working with lending institutions to negotiate the best possible mortgage rate for your situation. The mortgage broker has experience with all of the factors and terms used in the mortgage loan negotiation and can use this expertise to your benefit.

Repayment of the mortgage loan

When you are working out a plan of repayment for the mortgage loan, you should look at the amount of money available for down payment, the amount you can reasonably pay on the loan each month, the grace period of any adjustable mortgage loan interest rates and any fees owed for early repayment of the mortgage. Working with the mortgage broker, you should be able to develop a repayment plan for your mortgage which allows you to purchase and remain in your home through the life of the loan.

Tips For Getting the Lowest Mortgage Rate

If you are in the market for a mortgage, getting the best mortgage rate is essential to your financial security and well-being. You absolutely must do your research before settling on a mortgage, as there may be a lower rate out there. If you do not research the lowest mortgage rates and go with the first mortgage company and rate you come across, you may deeply regret your decision later on down the road. Here are some tips that will help you research the lowest mortgage rates out there.

Check Mortgage Rates Daily

Regardless of industry, interest rates fluctuate frequently, sometimes on a daily basis. Because of this fluctuation, it is wise to check the mortgage rates on a daily basis. If you want just a day or two before locking in your mortgage, you may end up saving yourself a ton of money in interest each month. The less interest you pay on your mortgage the less you end up paying annually; this is money that can be put into savings accounts, investments, or household maintenance.

Check Mortgage Company Policy

Some mortgage companies will allow you to lock in a lower interest rate once you have already committed to working with them. For example, if the interest rates drop more than half a point within thirty days of locking in your rate, some companies will allow for the lower rate on your mortgage. Other mortgage companies are not so lenient. Therefore, research the company policy before you commit to working with them.

Shop Around

There are plenty of lenders and mortgage brokers out there, so do your homework and shop around. Comparing loan offers from these different companies will help you find the most competitive rates, and the best option for your finances. When shopping around, be sure to look at more than just one Annual Percentage Rate (APR) or interest rate. And remember, you will need to compare all aspects of the mortgage offers, including closing costs, lender fees, and any other hidden charges.

Avoid Paying Points

Try to avoid paying points on your mortgage. Initially, paying points may seem appealing, but can end up costing you more in the long run. Remember, paying points means that you are just paying more upfront on your mortgage, which reduces the amount of your down payment. Avoid points if you are planning to stay in your home for only a short amount of time as well. Talk to your mortgage broker about this upfront.

Fixed vs. Adjustable Mortgage Rates

Make sure that you look into the options you have when it comes to fixed versus adjustable mortgage rates. You should not automatically expect your mortgage rate and payment to go up in a few years. Stick with a fixed rate mortgage and you will not only save money, but you will also be able to plan for your budget long-term.

Improve Your Credit Score

Your credit score will directly affect the mortgage rate you will end up getting, so be aware of what your credit rating and score is. The better your score the lower the mortgage rate will be because you are less of a risk to the lender. If you have some negative marks on your credit report, you should repair that before buying a home, if possible. This may delay your purchase, but will help you in the long run.

Put More Money Down

As you research mortgage rates and fees, you will quickly pick up on the idea that if you put more money into the down payment of your home, the less your monthly payment will be. Now, this will not necessarily help your mortgage rate become lower, but it will help your monthly payment. The ideal amount for a down payment is at least 20% and if you don’t have that, you may be forced to pay Private Mortgage Insurance (PMI). This is an additional fee that goes right to the bank.

Buy a Home During Economic Turmoil

During times of economic turmoil, mortgage rates tend to drop. This is a great time to buy a home, if you are able to, because the real estate industry is struggling. The lower your mortgage rate is, the less interest you will pay and the lower your monthly payments will be. This may be an ideal time to buy a first home, if you can afford it.

Buying a home is an exciting adventure, but should only be taken on if you can actually afford it. If you cannot afford the home, or purchase one outside of your means, you may quickly find yourself in a downward spiral of debt and uncertainty. Always do a bit of research before choosing a mortgage company and settling on a particular interest rate.