Why Finding The Lowest Interest Rate For A Mortgage Loan Is Not Always In Your Favor [mortgagethings.blogspot.com]

Why Finding The Lowest Interest Rate For A Mortgage Loan Is Not Always In Your Favor [mortgagethings.blogspot.com]

www.bestsyndication.com Have you ever wondered why banks continually change mortgage interest rates? There are many factors that help lenders determine both fixed rate and ARM mortgages. This video will explain how the interest rate is determined. There are many factors that affect mortgage rates including government bonds, rates that the government sponsored enterprise charge and the London Interbank Offered Rate. In this information program, we will discuss how these benchmarks are used to help bankers determine mortgage rates. One common benchmark cited for determining mortgage rates is the Federal Funds rate. This is the rate that banks charge other banks for overnight operations. That rate is currently in a range between zero and 0.25 percent. The discount rate is the Federal Reserve's primary interest rate. This is the rate that the Federal Reserve, also known as our central bank, charges member banks. Unlike th e Federal Funds rate, the Federal Reserve Bank has absolute power in determining this interest rate. The current primary rate for the member banks is 0.75 percent. Banks that are not eligible for this primary rate are charged 1.25 percent. A third seasonal rate is for small depository institutions that need to meet seasonal requirements. The Prime Rate is what banks charge their best customers, usually corporations and large companies. This rate is typically 2.5 to 3 percent above the Federal Funds rate. These rates rarely change, so why do mortgage rates ...

mortgagethings.blogspot.com How Do Banks Determine Mortgage Interest Rates?

Many people often fall into the temptation of searching for a mortgage loan that has the lowest interest rate but often times this is a huge mistake.


While the interest rate is important, it should never be the deciding factor as there are other costs involved. Just like how you would do research before buying a car, the same also applies for home mortgage loans.


Factor in all the costs for a loan


When people think about mortgage loans, the first thing they often think of is finding one that has the lowest interest rate. And this makes sense too but companies that offer lower interest rates may have terms and conditions that are not exactly favorable.


While a deal may look attractive, you need to consider all the costs that are involved before signing a deal.


The last thing you would want is to sign a 1.5% interest rate loan thinking it is a great deal only to find that the terms would leave you owing more than you borrowed. Besides looking at the interest rates, there are also points and origination fees which are upfront charges.


This amount is typically a percentage of the loan amount and often depends on your financial circumstances.
Get APR quotes from different lenders



Then you also need to consider additional fees as well that are needed to secure the loan like the underwriting and processing fees. When searching for a mortgage loan it is essential that you look at the overall costs instead of just focusing on the interest rate.


You can find a low rate but what good would it be if it means paying a high upfront cost and having high monthly payments?


When deciding which lender to choose, the best way is to look at the Annual Percentage Rate, or APR, as this a better representation of the true interest rate. When it comes to shopping for a home, there is much to consider besides the interest rate.


The type of home you buy will ultimately depend on what you can afford to spend and what your financial situation is like.
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