Mortgage Rates: Why Are They So Low?
Mortgage rates are determined every day by the Federal Reserve or the government. The interest rate a mortgagee will receive depends on several factors. The prime rate is one such factor. The prime rate is the rate you will receive from a lending institution if you apply for a loan. Many people think that if they have a great credit score or some other factor that they are guaranteed to receive a good interest rate, however this is not true.
Jumbo mortgage rates depend on a number of factors. Conforming loans are based on a certain index decided each day when most mortgage rates are released. For instance, a 30-year fixed rate is usually tied to what’s known as the Fannie Mae 30 year fixed mortgage bond. If you take out a loan that has a higher than average interest rate, your mortgage interest rate will be higher than many people with lower scores.
Other factors include the amount you want to borrow and your income. Lenders will usually look at what you earn and how much debt you have and then use these two factors together to determine your mortgage rates. A common misconception is that all borrowers with bad credit will have to pay high rates, however this isn’t the case. Traditional mortgages are available to those with bad credit as well.
You can increase your chances of receiving a good interest rate by shopping around for the best quotes from various lenders. There are several websites that allow you to request free quotes from various lenders. This allows you to compare interest rates from multiple lenders. This is one of the best ways to ensure that you get the best possible deal on your loan.
It may be necessary to extend your loan term if you have a poor credit history. If you do this, then you can generally expect to pay a higher interest rate until the end of your loan period. An extension can help you to save money because it allows the lender to collect extra interest payments over the life of the loan. For jumbo rates, this could potentially save hundreds of dollars per year.
One reason why some lenders are willing to give jumbo rates is because they feel that things will improve in the near future. However, there’s still no guarantee. The Federal Housing Administration (FHA) recently revised their guidelines to suggest that financial hardships are not considered a reason to prevent or delay home purchase. Even worse, the revised guidelines also state that your credit score is not a deciding factor either. This is bad news if you’re trying to purchase a home during a time when interest rates are falling.
The bad news is that if you’re trying to purchase a home during these low times and you have a lot of debt, you might be better off waiting to purchase a home with conforming loans until the economy improves. According to Brad Jackson, executive vice president of mortgage product research at Jackson Hewitt Bank in Round Rock, Texas, the low credit rates currently available might “drown a number of prospective buyers out of the water.” Even though homes are priced higher than ever before, many consumers cannot afford to purchase a home because of high balances on credit cards, loans, and home equity lines of credit.
Another option that homeowners have to obtain lower interest rates and keep down payment sizes is to refinance their adjustable rate mortgages. High interest rate loans with variable loan limits are ideal for borrowers with good credit who want to keep their monthly payments down. In order to qualify for fixed-rate mortgages, borrowers must maintain fixed mortgage loan limits. Unfortunately, fixed-rate mortgages are not yet common. To find the top mortgage rates available, use a mortgage rate calculator that displays loan details, current interest rates, and additional fees and points. Once you’ve found the best rates, be sure to shop around for the best lender so that you can lock in the lowest rates.