When applying for a mortgage, interest rates are always the first inquiry. While the importance of interest rates on your mortgage payment are important, other factors also contribute to the mortgage payment that many Plattsburgh consumers overlook.
For a quick quote of today’s mortgage rates call 518-324-5544
In addition to interest, you may also be required to pay mortgage insurance. For more information on mortgage insurance click (link to be added)
Many loan programs are available today and each loan program has a different mortgage insurance factor. While a 3.5% interest rate may sound attractive, the 1.3% annual mortgage insurance could be comparable to a mortgage with a 4.5% interest rate.
make sure to ask your Plattsburgh mortgage professional about mortgage insurance requirements and similar programs offering a higher interest rate without mortgage insurance.
Today’s Mortgage Rates are calculated based on market condition and primarily mirror the mortgage backed securities market.
Mortgage backed securities are the bonds that mortgage loans are turned into when they are bought or sold. That’s a tough one to grasp your first time around. I know it was for me.
Mortgage loan interest rates, and the corresponding fees or points charged for various rates, are driven by the prices of Mortgage Backed Securities (MBS). While lenders, in effect, set their own mortgage rates, how those rates are set is driven largely by the then current prices of Mortgage Backed Securities.
When executing a mortgage market analysis. We want to assess the movements of MBS prices(which change by the second), in conjunction with the macroeconomic climate, in order to determine which way they might be headed and what future events can have an impact.
When mortgage backed securities lower their prices, this entices buyers which raises mortgage rates.
Direct lenders originate loans, and wholesale and correspondent lenders purchase loans, from Mortgage Brokers or smaller lenders, most often with the intent to resell those loans into the secondary market, packaging them into MBS. So the going price in the secondary market for loans at various interest rates influences the rates and prices a lender will offer to the public or a Mortgage Broker. Although lender and wholesaler rate sheets are typically issued no more than a couple of times each day, the value of the mortgages, or the price of MBS, is actually constantly changing.
Unlike purchasing or selling stock, where the price is whatever it is at the moment you make the trade, lenders generally issue a rate sheet setting forth their rates and corresponding points/premiums for those rates, and honor those rates, until the change in MBS prices reaches a certain threshold, before passing new prices on to their customers in the form of a new rate sheet. Typically lenders will issue new rate sheets as prices change by more than 4/32nds to 8/32nds, or 0.125% to 0.25% points.
intermediate term bonds and long-term mortgages (more properly, Mortgage-Backed Securities, or MBS) compete for the same fixed-income investor dollar. Treasury issues are 100% guaranteed to be repaid, but mortgages are not; therefore mortgages carry more risk of default or early repayment, which could potentially disturb the return on the investment. Therefore, mortgage rates must be priced higher to compensate for that risk.
Contrary to popular myth, the Fed (more properly, the Federal Reserve) doesn’t control mortgage rates. In fact, their most well-known policy tool — the Federal Funds rate — is the overnight interest rate which banks charge each other when a bank needs to borrow money to meet end-of-day reserve requirements. Simply, those rules say that a bank must have so much cash on hand when the books close at the end of the day, and those funds can be borrowed from another bank at this interest rate.
You should know that the Fed merely “suggests” what that rate should be, which is why it’s called a “target” rate; the actual rate is negotiated between the borrower bank and the lender bank.
So what moves mortgage rates? Supply. Demand. Competition for money. Inflation. The Economy. Expectations. And you, of course.