Interest rates are impacted by a borrower’s credit score, loan term, mortgage program and a series of market factors that are outside of our control.
Unfortunately, many advertisers will tease a low interest rate in a marketing campaign for the purpose of creating interest in a specific loan program which may only fit a unique type of qualified borrower.
However, by promoting a lower note rate, with a higher APR, lenders are able to control the flow of the inbound phone call or Internet lead.
Understanding how interest rates work will certainly help relieve a lot of unnecessary anxiety about the home financing process.
While loan programs, credit scores and outside economic factors tend to control mortgage rates, borrowers do have the option of paying more up-front at the time of closing in the form of a discount point or loan origination fee in order to secure a lower interest rate.
Alternatively, borrowers currently have the option of taking a slightly higher rate in exchange for lower closing costs. This particular rate / closing cost scenario is sometimes referred to as a “No Closing Cost Loan” option, or something similar.
Many people believe that interest rates are set by lenders, but the reality is that mortgage rates are largely determined by what is known as the Secondary Market.
The secondary market consists of investors who buy the loans made by banks, brokers, lenders, etc. and then either hold them for their earnings, or bundle them and sell them to other investors.
When the secondary market sells the bundles of mortgages, there are end investors who are willing to pay a certain price for those loans.
Timing the market for the best possible opportunity to lock a mortgage rate on a new loan is certainly a challenge, even for the professionals.
While there are several generic interest rate trend indicators online, the difference between what’s advertised and actually attainable can be influenced at any given moment by at least 50 different variables in the market, and with each individual loan approval scenario.
Outside of the borrower’s control, the mortgage rate marketplace is a dynamic, volatile, living and breathing animal.
Lenders set their rates every day based on the market activities of Mortgage Bonds, also known as Mortgage Backed Securities (MBS).
On volatile days, a lender might adjust their pricing anywhere from one to five times, depending on what’s taking place in the market.
Inflation, The Federal Reserve, Unemployment, Gross Domestic Product and Geopolitics are a few of the items you can pay attention to if you’re trying to track rates for a 30 day lock.
Simply checking online for today’s posted rate may not lead to your expected outcome due to the many factors that can cause each individual rate and closing cost scenario to fluctuate.
Since mortgage rates can change several times a day, it’s more important to pre-qualify your lender about his/her competency level with regards to mortgage rates. If your lender doesn’t know what to look for or how to answer some basic questions, there is a good chance you may not ever see that initial interest rate you were quoted.
Low rates with high APR may or may not be the best deal.
Comparing apples to apples is the best way to determine which loan closing cost and rate scenario makes sense for your short and long-term financial goals.
The traditional news media generally announces mortgage rate movement a few days too late, or when rates are moving in the opposite direction of where we need them to go.
One of the big misconceptions most people have about mortgage rates is that the Fed, and / or Federal Government control what mortgage rates look like every day.
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Texas Mortgage Banker Disclosure – Figure: 7 TAC 81.200(c) “CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE BANKER OR A LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550. THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.”
205 ILCS 635/2-9 Posting of license
The license of a licensee whose home office is within the State of Illinois or of an out-of-state licensee shall be conspicuously posted in every office of the licensee located in Illinois. Out-of-state licensees without an Illinois office shall produce the license upon request. Licensees originating loans on the Internet shall post on their Internet website their license number and the address and telephone number of the Commissioner. The license shall state the full name and address of the licensee. The license shall not be transferable or assignable. A separate certificate shall be issued for posting in each full-service Illinois office. Licensee shall post on their internet web site the address and telephone number of the IDFPR. James R. Thompson Center
IDFPR-Residential Mortgage Banking
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Chicago, Illinois, 60601
Tel: (844) 768-1713