The easiest way to define a mortgage rate is to simply think of it as the amount of interest that will be paid on your mortgage. A mortgage is quoted as an APR or Annual Percentage Rate. Right now, current mortgage rates of right around 5.08 percent for a 30-year fixed, 4.57 for a 15-7year fixed, and for a 5/1 adjustable-rate it is about 5.12.
Whether you are a first-time homebuyer or looking to refinance your home, a mortgage rate is one of the most critical aspects of the whole home loan process. It is essential you learn about how mortgage rates work, how mortgage rates are determined, and why mortgage rates change so often. When you learn these important factors, you will more clearly be able to make decisions that are best for your financial future.
Mortgage rates are quite confusing to understand. In fact, there is no formula that is easily understood to determine current mortgage rates. There are so many different factors that contribute to the rise and fall of mortgage rates. It is even necessary to understand the secondary market to get a clear idea of how mortgages are sold and bought.
The secondary market sells and buys mortgages in a way that is very similar to bonds. If there was no secondary market for mortgages, it would be much more difficult to secure a mortgage for the everyday homebuyer. The rate at which secondary mortgages are sold is how mortgage rates are determined.
If the economy is good, investors are looking to invest in things that are riskier than bonds or mortgages. Therefore, mortgage rates go up. If the economy is doing poorly, investors look for safe investments like mortgages or bonds and the demand for these products goes up. This makes mortgage rates go down because there is high demand for the product. It is essentially a supply and demand model but with many determining factors.
When you are looking for a mortgage it is essential to not only closely monitor and study mortgage rates, but also look at the entire market. Even though no one can predict what is going to happen in a market, learning about and understanding what is going on will help you make decisions that are smart and well informed. This knowledge can save you a lot of money throughout your mortgage.
It is very important to shop around when you are looking for a mortgage. The more you look around, the more likely you are to find a lower interest rate. Even a small percentage lower can save you hundreds or thousands of dollars over the life of your mortgage. It is definitely worth doing the work to find the best rate.
If you are in the Military or are a Veteran, you definitely want to look into a VA mortgage. These types of mortgages require little or no down payment and lower interest rates.
Most people do not realize that mortgage rates do not follow or equal the benchmark interest rate of the Federal Reserve. These markets are so complex that they do not mirror mortgage rates at all. For instance, if the market is favorable it means it is not favorable for those looking to get a good mortgage rate. This is because the Federal Reserve looks into the near future, about 10 years down the road, and mortgage rates look into a more distant future, about 30 years.
Online, there are several ways to get instant mortgage rates.
Remember to look at more than one lender. Shopping around can save you as much as 3,500 dollars in just the first few years of your loan. Do your research, and you will be sure to get a fair and competitive rate.
Prodigy Lending is a DBA of AmCap Mortgage, Ltd. (NMLS ID# 129122 – www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/129122), an Equal Housing Lender.
Managing RMLO: Jason Turner (NMLS #286357)