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Mortgage interest rates, economic changes, loan programs explained

What does the conventional loan limit mean?

This refers to the limit which loans are consider eligible for underwriting by Fannie Mae. The conventional loan limit is $417,000 in all states excluding Alaska and Hawaii. Mortgage loan amounts over $417,000 are considered Jumbo Loans and may have slightly higher interest rates and fees.

Will the record rise in the stock market affect interest rates?

There is not a direct correlation between the stock market and mortgage interest rates. However, the indirect effect of more investment dollars in the stock market, could mean a residual of less money invested into mortgage backed securities, which would help push the interest rates up on mortgages.

What does CPI stand for and how does this effect mortgage interest rates?

CPI stands for consumer price index. This is an index that measures the price increases/decrease that consumers pay for products. The effect on interest rates is that this is a tool that measures inflation.

What does LIBOR stand for?

LIBOR is a common financial index that a number of adjustable rate mortgage programs are tied into. The acronym LIBOR stand for London Inter Banc Offered Rate.

What are the major things that would change mortgage interest rates?

Mortgage rates are generally affected by economic news as investors are either drawn into investing in mortgage bonds or taking their money into other investments. Major economic reports such as the CPI, PPI and the monthly jobs report have a large impact on the mortgage market.

When I compare mortgage quotes, what are considered third party fees?

Generally third party fees are referred to items such as your appraisal, title work, title insurance policy, recording fees, etc. They are not considered as fees paid to your lender to close your mortgage.

If the FED lowers the prime rate, should I keep my adjustable mortgage or should I still refinance out of this?

This is a great question. You should review your mortgage note to see where your current rate would adjust too based on your present index and then compare this with a few mortgage quotes. Long term fixed mortgage rates are at a very good level and this may be a great time to lock in a low fixed rate.

I would like to refinance into a 20 year term loan, will interest rates be lower on this type of mortgage?

Many lenders today offer both 20 and 25 year mortgage loans. Generally these mortgages have interest rate very similar to that of a thirty year mortgage loan.

I want to get the lowest mortgage rate, will I need to pay points?

This will depend on the lender and what loan program you decide on. Typically you can buy down the interest rate on a mortgage, by purchasing discount points up front. You will need to review how long you plan to keep your mortgage to determine if this is a good investment.

I am purchasing a new condo are there requirements for a mortgage different?

Typically condos will have different lending standards, for example if you are in a development with over four stories, if this condo is a townhouse or cannot. Every lender will have a specific set of guidelines and programs that will vary on the type of condo you plan to purchase.

There is a lot of discussion regarding sub-prime mortgage lenders in the news, what types of loans do they offer?

Sub-prime lenders typically work with B and C grade credit borrowers who typically would not qualify for a traditional mortgage. Some of these lenders offer programs for individuals who are recently out of a bankruptcy, foreclosure or may have other serious credit blemishes. Its important to point out, not everyone who may have had a credit issue in the past will need to have a non conventional mortgage.

How does the large drop in the stock market affect mortgage interest rates?

A large number of investors who have pulled money out of the market are investing in bonds. More investors choosing to invest in mortgage back securities should help lower mortgage rates in the short term.

I am applying for a jumbo loan mortgage, are interest rates much higher?

You will only need to apply for a jumbo loan if your mortgage amount will be over $417,000 in most states. Generally there is not a large difference, perhaps a quarter of a point, in mortgage rates on jumbo loans.

Where are interest rates compared to last year?

Mortgage rates have trended back to the same level they were at in November. This is a great time to get into a fixed rate mortgage  as interest rates have settled into a lower trend following last weeks federal reserve announcement.

Is it true that discount points on a mortgage are tax deductible?

Generally discount points are treated as mortgage interest. You are able to write off different amounts on your taxes depending if your mortgage was a refinance or purchase. You should consult your tax advisor to review your specific situation.

I live in California, is there a difference in mortgage interest rates between states?

Mortgage interest rates and closing costs will vary from state to state and lender to lender. Different states may have different required fees associated with specific loan programs. The best way to insure you get a competitive mortgage quote on a California mortgage loan is to compare a few mortgage quotes from top lenders, of the same type of loan program.

The Federal Reserves just announced they would not change rates, does that mean my adjustable rate mortgage will stay at the same rate?

Almost all adjustable rate mortgage loans will adjust based on the terms spelled out in your mortgage note. The feds decision to leave the prime rate at 8.25 will indirectly effect your mortgage by influencing the index that your note is tied into.  It is important to understand that the federal reserve does not directly raise or lower mortgage interest rates when they change the fed funds rate. Changing the fed funds rate, effects how banks borrow money and ultimately is felt in many areas of the economy, but is not directly tied into mortgage interest rates. Mortgage rates are generally priced based on mortgage backed securities and mortgage bonds which can be impacted by the overall economy and factors such as job growth, GDP, housing starts, PPI, CPI and other world economic events.

I just received a mortgage quote and I think I have a pretty good offer for a new mortgage, when do I lock in the mortgage rate?

This is an item you should review with your lender. Every lender's policy is different for how they handle rate locks. Important factors will be how soon you will be ready to close and whether or not there are fees to lock the rate.

Where are interest rates compared to last year?

Mortgage rates have trended back to the same level they were at in November. This is a great time to get into a fixed rate mortgage  as interest rates have settled into a lower trend following last weeks federal reserve announcement.

Will mortgage rates go up or down in 2007?

This is a great question! There is no certain way to predict the future of mortgage rates. We saw mortgage rates drop in the fourth quarter of 2006 and the great news is that over the past 4 years mortgage rates have hovered mostly in the six percent range for thirty year fixed mortgages. Key factors that will impact mortgage rates in 2007 include the economy, inflation and other political world events. One important thing we would mention is there has never been a better time to purchase a home!

How does the Federal Reserves recent announcement effect interest rates?

The federal reserve elected to leave the current federal funds interest rate alone for a 2nd consecutive session. It is important to understand that the federal reserve does not directly raise or lower mortgage interest rates when they change the fed funds rate. Changing the fed funds rate, effects how banks borrow money and ultimately is felt in many areas of the economy, but is not directly tied into mortgage interest rates. Mortgage rates are generally priced based on mortgage backed securities and mortgage bonds which can be impacted by the overall economy and factors such as job growth, GDP, housing starts, PPI, CPI and other world economic events.

How do I get the best mortgage rate?

The best way to ensure you are getting a good deal on a mortgage is to not focus strictly on the mortgage rate. When you are shopping for a mortgage rate, you should start by comparing multiple mortgage quotes and examine not only the mortgage rate, but closing costs, prepay penalties, loan programs. Typically the best way to get the best mortgage for your individual situation is to compare a few mortgage quotes from reputable companies.

 

 

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